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As the G7 leaders have a few days to lick their wounds, and all attention will continue to be on Trump, I’ll leave all that alone for now. One last thing: hope they understand now that ganging up on Trump is not a good idea. It would be good if the Democrats and media understand that too. They must all reinvent themselves.

Let’s turn to debt: “There is no set of math that works to pay this off.”

“Modern slaves are not in chains, they are in debt.” – Anonymous. You can find hundreds of quotes on the Internet discussing the problems of debt. Debt traps borrowers, lenders, and innocent bystanders, too. If debt were a drug, we would demand it be outlawed. The advantage of debt is it lets you bring the future into the present, buying things you couldn’t afford if you had to pay full price now. This can be good or bad, depending on what you buy. Going into debt for education that will raise your income, or for factory equipment that will increase your output, can be positive. Debt for a tropical vacation, probably not.

And that’s our core economic problem. The entire world went into debt for the equivalent of tropical vacations and, having now enjoyed them, realizes it must pay the bill. The resources to do so do not yet exist. So, in the time-honored tradition of lenders everywhere, we extend and pretend. But with our ability to pretend almost gone, we’re heading to the Great Reset. I’ve been analogizing our fate to a train wreck you know is coming but are powerless to stop. You look away because watching the disaster hurts, but it happens anyway. That’s where we are, like it or not.

And we don’t even really like to talk about it in polite circles. In a private email conversation this week, which must remain anonymous, this pithy line jumped out at me: “The total of Federal (remember they do not use GAAP) debt, state debt, and city debt [unfunded liabilities included] exceeds $200 trillion dollars. There is no set of math that works to pay this off. Let me be sure it’s heard by repeating it: There is no set of math that works to pay this off. Therefore, there has to be some form of remediation. This conversation is uncomfortable, so it is avoided.”

Mayors across the south of Italy have pledged to defy a move by the new Italian government – an alliance of the far right and populists – to prevent a rescue boat with 629 people on board from docking in the Sicilian capital. But the mayors’ defiance appears unlikely to serve any practical purpose without the direct support of the Italian coastguard. In the first evidence of the new government’s hardline approach, the interior minister, Matteo Salvini, said on Sunday that all Italian ports were closed to the rescue boat, Aquarius. The Maltese government rejected a request to take the boat, saying international law required that the migrants should be taken to Italian ports.

Salvini, the leader of the League, a far-right party, wrote on Facebook: “Malta takes in nobody. France pushes people back at the border, Spain defends its frontier with weapons. From today, Italy will also start to say no to human trafficking, no to the business of illegal immigration.” Leoluca Orlando, the mayor of Palermo, said he was ready to open the city’s seaport to allow the rescued migrants to safely disembark. “Palermo in ancient Greek meant ‘complete port’. We have always welcomed rescue boats and vessels who saved lives at sea. We will not stop now,” Orlando said. “Salvini is violating the international law. He has once again shown that we are under an extreme far-right government.’’

Other mayors in Italy’s south, including those in Naples, Messina and Reggio Calabria, also said they were ready to disobey Salvini’s order and allow Aquarius to dock and disembark in their seaports. A representative of Doctors Without Borders said the mayors’ remarks were “nice but not practical” because it was standard practice to wait for the Italian coastguard, which is under the control of the Italian government, to allow a ship to dock.

Italy’s new economy minister Giovanni Tria ruled out leaving the euro and said he would focus on structural reforms over deficit spending. “The position of the executive is clear and unanimous,” Tria told Italian newspaper Corriere della Sera in his first major interview since the country’s populist government was sworn in at the start of this month. “There isn’t any discussion on a plan to leave the euro,” he said, adding that “the government is determined, in any event, to prevent market conditions which push towards the exit to be materialized.”

Tria’s comments appeared designed to reassure financial markets — and to calm fears in the European Commission and among other EU governments that the new administration would implement anti-euro policies and clash with Brussels. Tria told Corriere that the government’s strategy would be “growth and employment” with a program “based on structural reforms,” and that his country would also “make progress on many aspects of the European governance program and banking union.” Though the new government has not adopted a policy of leaving the euro, some members of the coalition including Matteo Salvini, the new interior minister, have criticized the currency in the past and others have floated the idea of a referendum on Italy quitting the monetary union.

Nowhere in the Western world is truth respected. Even universities are imposing censorship and speech control. Governments are shutting down, and will eventually criminalize, all explanations that differ from official ones. The Western world no longer has a print and TV media. In its place there is a propaganda ministry for the ruling elite. Whistleblowers are prosecuted and imprisoned despite their protection by federal statue. The US Department of Justice is a Department of Injustice. It has been a long time since any justice flowed from the DOJ. The total corruption of the print and TV media led to the rise of Intermet media such as Wikileaks, led by Julian Assange, a prisoner since 2012.

Assange is an Australian and Ecuadorian citizen. He is not an American citizen. Yet US politicians and media claim that he is guilty of treason because he published official documents leaked to Wikileaks that prove the duplicity and criminality of the US government. It is strickly impossible for a non-citizen to be guilty of treason. It is strickly impossible under the US Constitution for the reporting of facts to be spying. The function of the media is to expose and to hold accountable the government. This function is no longer performed by the Western print and TV media. Washington wants revenge and is determined to get it.

If Assange were as corrupt at the New York Times, Washington Post, CNN, National Public Radio, MSNBC, etc., he would have reported the leaker to Washington, not published the information, and retired as a multi-millionaire with Washington’s thanks. However, unfortunately for Assange, he had integrity. Integrity today in the Western world has no value. You cannot find integrity in the government, in the global corporations, in the universities and schools, and most certainly not in the media.

This year’s Bilderberg summit is a council of war. On the agenda: Russia and Iran. In the conference room: the secretary general of Nato, the German defence minister, and the director of the French foreign intelligence service, DGSE. They are joined in Turin, Italy, by a slew of academic strategists and military theorists, but for those countries in geopolitical hotspots there is nothing theoretical about these talks. Not when the prime ministers of Estonia and Serbia are discussing Russia, or Turkey’s deputy PM is talking about Iran. The clearest indication that some sort of US-led conflict is on the cards is the presence of the Pentagon’s top war-gamer, James H Baker.

He is an expert in military trends, and no trend is more trendy in the world of battle strategy than artificial intelligence. Bilderberg is devoting a whole session to AI this year – and has invited military theorist Michael C Horowitz, who has written extensively on its likely impact on the future of war. Horowitz sees AI as “the ultimate enabler”. In an article published just a few weeks ago in the Texas National Security Review, he quotes Putin’s remark from 2017: “Artificial intelligence is the future, not only for Russia, but for all humankind. Whoever becomes the leader in this sphere will become the ruler of the world.”

Horowitz says “China, Russia, and others are investing significantly in AI to increase their relative military capabilities”, because it offers “the ability to disrupt US military superiority”. Global military domination is suddenly up for grabs – which brings us to the most intriguing item on this year’s Bilderberg agenda: “US world leadership”. [..] What the politicians at Bilderberg ought to realise, when they take a break from brainstorming war to enjoy the buffet, is that they are the buffet. There’s not much dignity in undermining democracy. But there is a huge pile of money, and for many people that’s enough.

Inward investment into Saudi Arabia collapsed last year, according to newly published data from the UN Conference on Trade and Development (UNCTAD), raising serious questions about the prospects for the economic reform agenda being pursued by Crown Prince Mohammed bin Salman (MBS). According to the latest UNCTAD World Investment Report, published on June 7, foreign direct investment (FDI) into Saudi Arabia last year amounted to just $1.4 billion, down from $7.5bn the year before and as much as $12.2bn in 2012. The precipitous fall means the country was outranked by far smaller economies in terms of its ability to attract international investment last year, with the likes of Oman and Jordan overtaking it in 2017, with inward FDI of $1.9bn and $1.7bn respectively.

The situation is equally stark when one looks at the amount of investment coming to Saudi Arabia compared to the rest of the surrounding West Asia region. While the kingdom accounted for around a quarter of total regional FDI between 2012 and 2016, last year it attracted just 5.6% of the regional total. While the Saudi economy has been losing out, others have been gaining a bigger piece of the pie. The UAE has seen its share of regional FDI more than double over the past six years, from 19% in 2012 to 41% in 2017. And even Qatar – which has been the subject of an economic boycott by Bahrain, Egypt, Saudi Arabia and the UAE since June last year – managed to increase its FDI take in 2017, attracting $986m compared to $774m a year earlier.

UNCTAD attributed the fall in investment into Saudi Arabia to significant divestments and negative intra-company loans by foreign multinationals. As an example, it pointed to the UK/Dutch Shell Group which sold its 50% stake in the Sadaf petrochemicals venture to its partner Saudi Basic Industries Corporation (Sabic) for $820m in August. However, the report also notes that FDI to Saudi Arabia has been contracting since the global financial crisis in 2008/09. And although there has been a similar pattern across the region – inflows to West Asia have fallen in most years since hitting a peak of $85bn in 2008 – the performance of Saudi Arabia last year is still appreciably worse than any other economy in the immediate neighbourhood. It is also far worse than the global picture – worldwide FDI inflows were down 23% last year to $1.43 trillion.

French farmers began a blockade of oil refineries and fuel depots on Sunday evening over plans by Total to use imported palm oil at a biofuel plant, which have fanned farmer discontent over unfair competition. The Vatry fuel depot in the Marne region of northeastern France was the first to be blocked on Sunday evening as about 100 farmers set up barricades with tractors and mounds of rubble, a spokesman from the FNSEA farmers union told Reuters. At least five sites will be blocked on Sunday evening, with a total of 13 sites blocked from 9 a.m. Monday, Christiane Lambert, president of the FNSEA said in an interview with France Info television.

French oil and gas major Total, which operates five refineries and nine petrol depots in France, said late on Sunday that farmers have gathered at two depots and it had taken measures together with authorities, to limit disruptions. It urged clients not to rush to petrol stations to fill their tanks, which could spark panic buying and shortages. The French authorities last month gave Total permission to use palm oil as one of the feedstocks at its La Mede biofuel refinery in southern France, infuriating farmers who grow local oilseed crops such as rapeseed and environmentalists who blame palm oil cultivation for deforestation in southeast Asia.

[..] Palm oil has been widely criticized in Europe for environmental destruction and some lawmakers are pushing for a ban on its use in biofuel as part of new EU energy targets. The issue has caused friction with Indonesia and Malaysia, the world’s two largest palm oil producers, with Malaysian officials warning of trade repercussions that could affect a potential deal to buy French fighter jets. The refinery protests in France also illustrate a souring relationship between farmers in the EU’s biggest agricultural producer and the government of President Emmanuel Macron. Many farmers welcome the president’s call for fairer farmgate prices as part of a food chain review last year, but they have been angered by Macron’s attempt to phase out common weedkiller glyphosate before other EU countries.

He’s currently enjoying a great bounty of nature, from tree-climbing slugs to blackbird-gobbling little owls on this year’s Springwatch, but Chris Packham warns that we are presiding over “an ecological apocalypse” and Britain is increasingly “a green and unpleasant land”. The naturalist and broadcaster is urging people to join him next month on a 10-day “bioblitz”, visiting road verges, farmland, parks, allotments and community nature reserves across the country to record what wildlife remains – from butterflies to bryophytes, linnets to lichens. According to Packham, British people have normalised a “national catastrophe” and only see a wealth of wildlife in nature reserves, with the wider countryside bereft of life.

“Nature reserves are becoming natural art installations,” he said. “It’s just like looking at your favourite Constable or Rothko. We go there, muse over it, and feel good because we’ve seen a bittern or some avocets or orchids. But on the journey home there’s nothing – only wood pigeons and non-native pheasants and dead badgers on the side of the road. “It’s catastrophic and that’s what we’ve forgotten – our generation is presiding over an ecological apocalypse and we’ve somehow or other normalised it.” Packham said he looked at the rolling hills beyond this year’s setting for Springwatch on the National Trust’s Sherborne estate in the Cotswolds and despaired. “How many wildflowers can we see? None. Where’s the pink of ragged robin? Where’s the yellow of flag iris? The other colours are not there. It’s not green and pleasant – it’s green and unpleasant.”

Packham’s recent tweets have gone viral after he commented on the absence of insects during a weekend at his home in the middle of the New Forest national park. He did not see a single butterfly in his garden and said he sleeps with his windows open but rarely finds craneflies or moths in his room in the morning whereas they were commonplace when he was a boy. Since Packham first became passionate about birds, in 1970, Britain has lost 90 million wild birds, with turtle doves (down 95% since 1990) hurtling towards extinction. The State of Nature 2016 report described Britain as being “among the most nature-depleted countries in the world”, with scientific data from more than 50 conservation and research organisations revealing that 40% of all species are in moderate or steep decline.

The leader of Turkey’s nationalist MHP opposition party Devlet Bahceli, an ally of Turkish President Recep Tayyip Erdogan, attacked Greece and Cyprus during an election rally in Izmir on Sunday, claiming “Cyprus is Turkish.” Bahceli was commenting on Greek criticism over an MHP campaign video that depicts the island of Cyprus as Turkish territory. “What else are we to do? Cyprus is Turkish and will remain so,” he was quoted as saying by Turkish conservative newspaper Yeni Safak. He went on to “warn” Greeks not to forget “the days when their grandfathers drowned in the bottom of the sea,” and accused the Greek government of “playing games” in the Aegean.

Austria’s move to close mosques and expel “foreign-funded” imams has infuriated Turkish President Recep Tayyip Erdogan, warning of a war “between cross and crescent” and threatening that Ankara will not sit idle. “These measures taken by the Austrian prime minister are, I fear, leading the world towards a war between the cross and the crescent,” Erdogan said in a speech in Istanbul on Sunday. Crescent, which can be seen on mosques and other Muslim entities, symbolizes Islamic religion since time immemorial. “They say they’re going to kick our religious men out of Austria. Do you think we will not react if you do such a thing?” he asked, quoted by AFP. “That means we’re going to have to do something,” Erdogan added without elaborating.

Earlier this week, Austrian Interior Minister Herbert Kickl from the right-wing FPO party announced that the country vows to close seven mosques and potentially expel dozens of Turkish-funded imams and their families in Austria’s crackdown on “political Islam.” Austrian officials, including Chancellor Sebastian Kurz, claimed the move was to battle radicalization and growing ‘parallel societies’. However, this explanation did not sit well with Ankara. “Austria’s decision to close seven mosques and expel imams is a reflection of the Islamophobic, racist and discriminatory wave in this country,” Ibrahim Kalin, the spokesman of Tayyip Erdogan, commented on Twitter.

Greece has put in place the “greatest possible” measures to protect eight Turkish commandos accused of being coup plotters after Ankara said it would do everything possible to bring them back. A week after the men were freed from detention, Athens said they were under 24/7 guard at an undisclosed location, for fear of retaliation. The admission came despite mounting tensions with Ankara, which has scrapped a refugee readmission deal with Athens, arguing the soldiers participated in the abortive coup against Recep Tayyip Erdogan in July 2016. Greece’s deputy defence minister, Fotis Kouvelis, told the Guardian: “We are enforcing the greatest possible measures to secure their safety in a place which for obvious reasons will remain unknown.

“We haven’t forgotten what happened in our region a few months ago.” Kouvelis was referring to the enforced removal from Kosovo of six Turkish citizens also denounced as followers of the US-based cleric Fethullah Gülen, who Ankara has blamed for orchestrating the putsch. Tensions over the eight men, who flew into Greece on a Black Hawk helicopter a day after the failed coup, have added to an increasingly fiery campaign ahead of in Turkey on 24 June. Friction with the west has escalated as the race appears to have tightened. At the weekend, Erdogan accused Austria of fomenting a religious war between “cross” and “crescent” after it raised the prospect of expelling Turkish Muslim clerics.

But Greece has been the focus of growing animus in Ankara. Turkey has consistently argued the eight men were involved in the putsch against Erdogan. The Greek supreme court has rejected any notion of sending the men back, saying they would not get a fair trial in Turkey, where a purge of the military and civil establishment continues. In April, the council of state, Greece’s highest administrative court, granted one of the eight commandos permanent asylum, despite objections by Alexis Tsipras’s leftist-led government. Similar judgments are expected to follow when verdicts are issued in the remaining cases.

Greece submitted a draft bill to parliament late on Friday, a bill fully packed with austerity measures worth 5.1 billion euros and counter-measures worth 1.5 billion, in an effort to sweeten the bitter pill to thousands of pensioners and employees. The bill outlines reforms in the energy, pension and labor sectors as the government races to secure the last loans from its international bailout program, conclude the last program review and head to a so-called “clean exit” in August. The bill includes the country’s medium-term fiscal strategy framework through 2022, which foresees an average 2 percent annual growth and pledges to increase minimum wages and restore collective labor bargaining.

At the same time, the bill includes measures to expedite privatizations in the energy sector, the reduction of state spending on pensions and labor market reforms including arbitration when there is a dispute between employers and staff. • Pension cuts up to 18% to be implemented as of 2019. • Tax-free basis will be broadening to annual income of 5.686 euros, when EU’s poverty line is at 6,000. The measure to go into effect as of 2020. • Privatizations worth 3.9 billion euros
Lawmakers are expected to vote on the bill on upcoming Thursday, before the Eurogroup of June 21.

Athens is keen to pass a final review by its creditors ahead of a Eurogroup meeting on June 21, where it is also hoping for progress on a deal on further debt relief to be implemented after the current bailout program expires in August. If it gets the green light from the review and Eurogroup, it will receive about 12 billion euros ($14 billion) of new loans. [..] revenues will increase through the pension cuts, the changes in real estate objective value that will increase the property taxes, scrapping the decreased of Value Added Tax on all islands, scrapping the 15% discount on social security contributions as of 2019. • Pension cuts worth €2.9 billion annually. €1.2 billion will be cut from public sector pensions and €1.4 billion on private sector pensions. • Broadening the tax-free basis will bring revenues worth €1.9 billion.

We now stand where two roads diverge. But unlike the roads in Robert Frost’s familiar poem, they are not equally fair. The road we have long been traveling is deceptively easy, a smooth superhighway on which we progress with great speed, but at its end lies disaster. The other fork of the road—the one less traveled by—offers our last, our only chance to reach a destination that assures the preservation of the earth. –Rachael Carson, Silent Spring What’s important to keep in mind in this quote from Rachael Carson’s 56-year-old warning shot over the bow of corporate civilization is that there are two roads being traveled now. We are no longer at a fork. The fork is half-a-century behind us. The goal is not to get the superhighway to somehow re-route itself and follow the path less traveled. It can’t.

The superhighway will, and must, continue accelerating in its inevitable direction, simply because the greed and power of the people driving that highway will not allow them to alter course. But if there is any truth to Rachael Carson’s warning (and there seems to be growing evidence of it) the other path—the Road Less Traveled—will become the surviving branch of our evolutionary diagram. The present goal, therefore, should be to create as many exits from the superhighway as possible—and to encourage and enable as many people as possible to take those exits to explore and follow the other path. Visualizing how we all got on this superhighway in the first place will be helpful to seeing the exit ramps. To make this visualization, it isn’t necessary to speculate about an ancient, human pre-history.

The process can be clearly seen and understood in a modern anecdote describing how one particular community of people joined the highway. I quote now from the book Fishing Lessons by Kevin M. Bailey*, where he retells author Robert Johannes’ story of fishermen in Palau, an island country in Micronesia. “Seafood was once abundant there. The Palauan fisherman never had trouble finding enough fish to satisfy their own and their village’s needs. The fisherman gave away the fish they didn’t eat to other villagers…. They lived in a state of ‘subsistence affluence.’ “…. After Japan colonized Palau in the 1920s the fishermen began to sell their fish to obtain attractive and exotic goods offered by the Japanese. The fishermen bought nets and motorized boats with the money, allowing them to catch more fish to sell in order to obtain more goods.

They fished harder to harvest more fish and visited more distant areas of the reef to find them. Over the years, the fish abundance dropped. “The fishermen bought even bigger boats to catch the vanishing fish, but to do that they had to borrow money. They had to sell all their fish to pay off their loans. They stopped giving them away in the villages; instead they sold them to the outsiders and to other villagers. Now the people in the village had to work for the money to buy their food…. “Pretty soon, there were not enough fish over the reefs for the fishermen to make payments on their loans, so the village sold their customary access rights to the fishing grounds. The people in the village began to eat imported fish in cans.”

Hong Kong, Sweden, China and Australia could all find themselves in hot water over private-sector debt if borrowing costs rise, according to research by Oxford Economics. That’s because those countries all have a particularly high share of floating-rate debt in relation to economic output. If interest rates increase, households and companies are likely to feel the pinch, the study of 16 economies found. With global economic momentum picking up, several major central banks are weighing steps to tighten policy, though the pace of movement varies significantly. The Federal Reserve is expected to raise interest rates again next week and economists also predict that Sweden’s Riksbank will tighten policy later this year.

Oxford Economics estimated that an interest rate rise of 100 basis points would raise Hong Kong’s debt service ratio by around 2.5% of GDP after a year, while Sweden, China and Australia would experience increases of between 1.5% and 1.7% of GDP. By contrast, Germany, where debt levels are moderate, as well as France and the U.S. are less likely to suffer. For the latter two, that’s because mortgages are typically of fixed rate.

Most people are aware that GDP growth has been lower than expected in the aftermath of the Global Financial Crisis of 2008 (GFC). For example, real GDP growth for the past decade has been closer to 1.5% than the 3% experienced in the 50 years prior to 2008. As a result of the combination of slow economic growth and deficit spending, most people are also aware that the debt/GDP ratio has been rising. However, what most people don’t know is that, over the past ten years, the dollar amount of cumulative government deficit spending exceeded the dollar amount of GDP growth. Put another way, in the absence of deficit spending, GDP growth would have been less than zero for the past decade. Could that be true?

Let’s begin with a shocking chart that confirms the statements above, and begins to answer the question. The black line shows the difference between quarterly GDP growth and the quarterly increase in Treasury debt outstanding (TDO). When the black line is above zero (red dotted line), the dollar amount is GDP is growing faster than the increase in TDO. From 1971 to 2008, the amount of GDP typically grew at a faster rate than the increase in TDO, which is why the black line is generally above the red dotted line.

Most people are aware that GDP growth has been lower than expected in the aftermath of the Global Financial Crisis of 2008 (GFC). For example, real GDP growth for the past decade has been closer to 1.5% than the 3% During the 1971-2008 period, inflation, budget deficits, and trade deficits varied widely, meaning that the relationship between GDP growth and TDO was stable even in the face of changes in other economic variables. Regardless of those changing economic variables, the US economy tended to grow at a pace faster than TDO for four decades. The only interruptions to the pattern occurred during recessions of the early 1980s, early 1990s, and early 2000s when GDP fell while budget deficits did not.

[..] From 2008-2017, GDP grew by $5.051 trillion, from $14.55 trillion to $19.74 trillion. During that same period, the increase in TDO totaled $11.26 trillion. In other words, for each dollar of deficit spending, the economy grew by less than 50 cents. Or, put another way, had the federal government not borrowed and spent the $11.263 trillion, GDP today would be significantly smaller than it is. It is possible to transform Chart 1, which shows annual changes in TDO and GDP from 1970-2017, into Chart 3 below, which shows the cumulative difference between the growth of TDO and GDP over the entire period from 1970-2017. The graph below clearly shows the abrupt regime change that occurred in the aftermath of the GFC. A period in which growth in GDP growth exceeded increases in TDO has been replaced by a period in which increases in TDO exceeded GDP growth.

The US gross national debt jumped by $72.8 billion in one day, on Thursday, the Treasury Department reported Friday afternoon. This March 16 is a historic date of gloomy proportions, because on this date, the US gross national debt punched through the $21 trillion mark and reached $21.03 trillion. Here’s the thing: On September 7, 2017, a little over six months ago, just before Congress suspended the debt ceiling, the gross national debt stood at $19.84 trillion. In those six-plus months – 132 reporting days, to be precise – the gross national debt spiked by $1.186 trillion. I tell you, these dang trillions are flying by so fast, they’re hard to see. And we wonder: What was that? Where did it go?

Whatever it was and wherever it went, it added 6% to the gross national debt in just 6 months. And with 2017 GDP at $19.74 trillion in current dollars, the gross national debt now amounts to 106.4% of GDP. In the chart below, the flat spots are the various debt-ceiling periods. This is a uniquely American phenomenon when Congress forbids the Administration to borrow the money that it needs to borrow in order to spend it on the things that Congress told the Administration to spend it on via the appropriation bills. So that’s where we are, on this glorious day of March 16, 2018:

Russia has announced it will expel 23 British diplomats in response to the expulsion of 23 Russian diplomats from Britain. The move marks the latest development in the diplomatic spat over the poisoning of former Russian spy Sergei Skripal in Salisbury on 4 March. The Russian Foreign Ministry announced on Saturday morning that the 23 diplomatic representatives of the British Embassy in Moscow should leave Russia within a week. The ministry also said all activities by the British Council, the UK’s international organisation for cultural relations, would cease in Russia and that the planned reopening of the British consulate in St Petersburg would no longer go ahead. The ministry warned that Russia could take further measures if Britain takes any more “unfriendly actions” against the country.

Shortly before the announcement, British ambassador to Russia, Laurie Bristow, was summoned to the foreign ministry for talks, where he learned of the retaliation measures. As he left the ministry, Mr Bristow said: “This crisis has arisen as a result of an appalling attack in the UK, the attempted murder of two people using a chemical weapon developed in Russia and not declared by Russia to the Organisation for the Prohibition of Chemical Weapons (OPCW) as Russia is obliged to do under the Chemical Weapons Act.” The retaliation from Russia comes four days after Theresa May announced that 23 Russian diplomats would be expelled from Britain after Russia missed a deadline to provide an explanation for the poisoning of Skripal and his daughter Yulia. Both remain critically ill in hospital.

Russia has continued to dismiss accusations of Russian culpability for the attack and to deny possessing Novichok, the nerve agent used in the incident. On Friday, UK Foreign Secretary Boris Johnson directly accused Russian President Vladimir Putin of ordering the poisoning, saying it was “overwhelmingly likely” Mr Putin personally ordered the assassination attempt. Dmitry Peskov, Russian presidential press secretary, responded to the verbal escalation with a further denial of the state’s involvement. “Any reference or mention of our President in this connection is nothing but a shocking and unforgivable violation of the diplomatic rules of propriety,” Mr Peskov said.

Large companies with significant digital revenues in the European Union such as Google and Facebook could face a 3% tax on their turnover under a draft proposal by the European Commission seen by Reuters. The proposal, expected to be adopted next week and still subject to changes, updates an earlier draft which envisaged a tax rate of between 1 and 5%. The tax, if backed by EU states and lawmakers, would only apply to large firms with annual worldwide revenues above 750 million euros (£662.2 million) and annual “taxable” revenues above 50 million euros in the EU. The threshold for EU revenues has been raised from 10 million euros initially foreseen to exempt smaller companies and emerging start-ups from the tax.

Large U.S. firms such as Uber, Airbnb and Amazon could also be hit by the new levy, which would apply across the 28 EU countries. Big tech firms have been accused by large EU states of paying too little tax in the bloc by re-routing some of their profits to low-tax member states like Ireland and Luxembourg. Services that will be taxed are digital advertising, which would capture both providers of users’ data like Google, and companies offering ad space on their websites, like popular social media such as Facebook. The tax would be also be levied on online platforms offering “intermediation services,” a concept under which the Commission includes gig economy firms such as Airbnb and Uber. Digital market places, including Amazon, would also be within the scope of the levy.

Goldilocks is a conceit of monetary central planning and its erroneous predicate that falsifying financial asset prices is the route to prosperity. In fact, it only leads to immense and unstable financial bubbles which eventually crash – monkey-hammering the purported Goldilocks Economy as they do. It also leads to a complete corruption of the economic and financial narrative on both ends of the Acela Corridor. To wit, the Fed’s serial financial bubbles on Wall Street are falsely celebrated as arising from a booming main street economy. In fact, they are an economic dagger that bleeds it of investment and cash and exposes it to “restructuring” mayhem from the C-suites when the egregious inflation of share prices and stock option values finally gets crushed by another financial meltdown.

In this context, the Washington Post (WaPo) is out this morning with brutal takedown of our friend Larry Kudlow for his ebullient whistling past the graveyard on the eve of the financial crisis and Great Recession. It would be an understatement to say he didn’t see it coming, but it’s also completely unfair not to acknowledge that 95% of Wall Street and 100% of the FOMC were equally bubble-blind. In fact, when Larry Kudlow waxed eloquently in a piece in the National Review about the awesome economy the George Bush Administration had produced in December 2007, he was just delivering the Wall Street consensus forecast for the coming year:

“There’s no recession coming. The pessimistas were wrong. It’s not going to happen. At a bare minimum, we are looking at Goldilocks 2.0. (And that’s a minimum). Goldilocks is alive and well. The Bush boom is alive and well. It’s finishing up its sixth consecutive year with more to come. Yes, it’s still the greatest story never told…….In fact, we are about to enter the seventh consecutive year of the Bush boom.”

Well, not exactly. The worst recession since the 1930s actually incepted that very month and 10 months latter came Washington’s hair-on-fire moment when the monetary and fiscal spigots were opened far wider than ever before – bailing out everything that was collapsing, tottering, moving or even standing still.

Sunday night was Secretary of Education Betsy DeVos’s turn through the CBS 60-Minutes wringer of censure with a visibly frustrated inquisitor Lesley Stahl trying to hector her into self-incrimination. The sad truth about American schools is that they’re a mirror for the painful collapse of the society they supposedly serve — a process ongoing for decades before Ms. DeVos came on the scene. The expectation that some uber-regent can or ought to fix public education is bound to disappoint a news media searching for saviors. The further we leave the 20th century behind, the more anomalous its organizing principles look, especially the idea of preparing masses of young people for mass, regimented work at the giant corporate scale.

There’s a big divergence underway between the promises of schooling and the kind of future that the 21st century is actually presenting — of no plausible careers or vocations besides providing “therapy” and policing for the discontented masses stewing in anomie and compensatory pleasure-seeking, with all its nasty side effects. In the meantime, we’re stuck with wildly expensive, out-of-scale, giant centralized schools where the worst tendencies of human status competition are amplified by smart phones and social media to all but eclipse classroom learning.

Education in the years to come is destined to become more of a privilege than a right, and it will probably depend more on how much an individual young person really desires an education than just compelling masses of uninterested or indisposed kids to show up everyday for an elaborate and rather poorly supervised form of day-care. But it’s difficult to let go of old habits and obsolete arrangements, especially when we’ve spent countless billions of dollars on them. I call the future a World Made By Hand because it is going to be entirely unlike the sci-fi robotic fantasy that currently preoccupies the thought-leaders in this culture. A lot of what will be required in this time-to-come will be physical labor and small-scale skilled work in traditional crafts. There never were that many job openings for astronauts, not even in the 1960s, but in the decades ahead there will be none — notwithstanding Elon Musk’s wish to colonize Mars.

In Los Angeles, the more the politicians push to solve the city’s festering homelessness crisis, the worse it seems to get. The city leadership has taken one bold step after another: restructuring the budget to free more than $100m a year in homelessness funding, sponsoring one voter-approved initiative to raise more than $1bn for housing and backing another regional proposal to raise the sales tax and generate an estimated $3.5bn for support services over the next decade. And yet the tent cities continue to proliferate, in rich neighborhoods and poor, by the beach, the airport, the Hollywood Walk of Fame and within view of City Hall itself. It’s the sorriest urban scene anywhere in America, and the same voters who not so long ago opened their hearts and their wallets to put an end to it are growing increasingly impatient.

As the numbers of homeless people continue to rise – the latest figures put the countywide number at 58,000, up more than 20% in a single year – and new encampments spring up on sidewalks, under freeways, and along stretches of river and rail lines, the politicians who not so long ago were earning praise for their courage are facing the beginnings of an angry backlash. “How many people have we housed?” the Los Angeles Times asked impatiently in a blistering series of editorials late last month. “How many are we on track toward housing? Is Los Angeles setting the national standard for rapid and effective response to a vexing problem? Or are its leaders merely mastering the art of appearances while passing the buck and hoping things turn around? … Who’s in charge here?”

John F Kennedy’s last speech reads like a warning from history, as relevant today as it was when it was delivered in 1963 at the Dallas Trade Mart. His rich, Boston Brahmin accent reassures us even as he delivers the uncomfortable message. The contrast between his eloquence and the swagger of Donald Trump is almost painful to hear. The problem is, Kennedy never spoke these words. He was killed before he made it to the Trade Mart. You can only hear them now thanks to audio technology developed by a British company, CereProc. Fragments of his voice have been taken from other speeches and public appearances, spliced and put back together, with neural networks employed to mimic his natural intonation.

[..] “Dual use” of technology is not a new problem. Nuclear physics gave us both energy and bombs. What is new is the democratisation of advanced IT, the fact that anyone with a computer can now engage in the weaponisation of information; 2016 was the year we woke up to the power of fake news, with internet conspiracy theories and lies used to bolster the case for both Brexit and Donald Trump. We may, however, look back on it as a kind of phoney war, when photoshopping and video manipulation were still easily detectable. That window is closing fast. A program developed at Stanford University allows users to convincingly put words into politicians’ mouths. Celebrities can be inserted into porn videos. Quite soon it will be all but impossible for ordinary people to tell what’s real and what’s not.

What will the effects of this be? When a public figure claims the racist or sexist audio of them is simply fake, will we believe them? How will political campaigns work when millions of voters have the power to engage in dirty tricks? What about health messages on the dangers of diesel or the safety of vaccines? Will vested interests or conspiracy theorists attempt to manipulate them? Unable to trust what they see or hear, will people retreat into lives of non-engagement, ceding the public sphere to the already powerful or the unscrupulous? The potential for an “information apocalypse” is beginning to be taken seriously. The problem is we have no idea what a world in which all words and images are suspect will look like, so it’s hard to come up with solutions.

Perhaps not very much will change – perhaps we will develop a sixth sense for bullshit and propaganda, in the same way that it has become easy to distinguish sales calls from genuine inquiries, and scam emails with fake bank logos from the real thing. But there’s no guarantee we’ll be able to defend ourselves from the onslaught, and society could start to change in unpredictable ways as a result. Like the generation JFK was addressing in his speech, we are on the cusp of a new and scary age. Rhetoric and reality, the plausible and the possible, are becoming difficult to separate. We await a figure of Kennedy’s stature to help us find a way through. Until then, we must at the very least face up to the scale of the coming challenge.

China said it will begin applying its so-called social credit system to flights and trains and stop people who have committed misdeeds from taking such transport for up to a year. People who would be put on the restricted lists included those found to have committed acts like spreading false information about terrorism and causing trouble on flights, as well as those who used expired tickets or smoked on trains, according to two statements issued on the National Development and Reform Commission’s website on Friday. Those found to have committed financial wrongdoings, such as employers who failed to pay social insurance or people who have failed to pay fines, would also face these restrictions, said the statements which were dated March 2.

It added that the rules would come into effect on May 1. The move is in line with President’s Xi Jinping’s plan to construct a social credit system based on the principle of “once untrustworthy, always restricted”, said one of the notices which was signed by eight ministries, including the country’s aviation regulator and the Supreme People’s Court. China has flagged plans to roll out a system that will allow government bodies to share information on its citizens’ trustworthiness and issue penalties based on a so-called social credit score.

We’re going to figure this one out way too late. The time to stop this is now, not at some future point down the line. But we’re not doing anything at all. We blindly parrot claims about clean energy and electric cars that will allegedly ‘save’ us, because we want to do the saving without paying a price for it that makes our lives one iota less comfy.

Earth is enduring a mass species extinction, scientists say – the first since the demise of the dinosaurs and only the sixth in half-a-billion years. The reason? Humanity’s voracious consumption, and wanton destruction, of the very gifts of nature that keep us alive. Starting Saturday, a comprehensive, global appraisal of the damage, and what can be done to reverse it, will be conducted in Colombia. “The science is clear: biodiversity is in crisis globally,” WWF director general Marco Lambertini told AFP ahead of a crucial meeting of the Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services (IPBES). “We depend on biodiversity for the food we eat, the water we drink, the clean air we breathe, the stability of weather patterns, and yet our actions are pushing nature’s ability to sustain us to the brink.”

Scientists and government envoys will gather as the 128-member IPBES to dot the i’s and cross the t’s on five monumental assessment reports designed to inform global policymaking into the future. Compiled over the last three years, the reports will provide the most up-to-date picture of the health of the world’s plants, animals and soil. [..] Meeting host Colombia claims to boast the world’s largest variety of birds and orchids and is second only to Brazil in terms of overall species diversity. Paradoxically, decades of conflict have preserved fragile habitats in no-go zones in the country, whose mountainous topography supports 311 different ecosystems.

While there is still some fringe debate what companies will do with the hundreds of billions in offshore funds repatriated to the US as part of the recently passed Trump tax reform, the discussion is largely over, especially after last week’s Cisco results. The company, which has $68 billion of overseas cash, third after AAPL and MSFT, announced that it would raise its buyback authorization by $25 billion, and revealed plans to repurchase its entire authorization of $31 billion during the next 6-8 quarters, equal to roughly 15% of its current market cap. Call it a partial LBO, courtesy of Donald Trump.

[..] Here’s what Goldman’s David Kostin said in his latest Weekly Kickstart report: “Since December, S&P 500 firms have announced buybacks totaling $171 bn. YTD announcements of $67 bn represent a 22% increase versus the same period in 2017. The buyback window has re-opened and firms are taking advantage of the recent correction; the GS Buyback Desk reported that last week was the most active week in its history.” The $171 billion in YTD stock buyback announcements is the most ever for this early in the year. In fact, it is more than double the prior 10 year average of $77 billion in YTD buyback announcements.

[..] in addition to what we first pointed out over two years ago, namely that all net debt issuance in the 21st century has been used to pay for stock buybacks… here is what John Hussman commented on this record last hurrah in stock buybacks: “Though buybacks are primarily debt-financed, they are also highest at market peaks, and contract sharply at major market troughs. Corporations are still borrowing to buy the dip at peak valuations, within a few percent of extremes associated with prospective 10-12yr market losses.”

There’s no question that, in an economy and in a financial system where there’s the level of debt that we have and the sensitivity to interest rates, rising rates are kind of a pre-condition to equity market disruptions and selloffs. I think that the level of volatility selling and its integration into risk models across virtually every type of investment strategy are contributors. And, having gone through such a long period with very, very little movement, I’d say that many people’s trading books were robust for relatively small moves. But once you’ve passed a certain move – and I think in this case it was probably the S&P down 3-ish% that triggered a whole series of different adjustments that people needed to make to their books and their option books – that then amplified the move in volatility and led to this blowup in the VIX product.

But you have to remember that these VIX products were extremely ill-designed. And they were very vulnerable to this. They’re a rare thing that you see in our industry, which is they had a predefined stop loss. And markets are pretty good at finding stop losses and triggering them. I started my career in the commodity pits, and I witnessed firsthand how the commodity pit is built around finding stop losses on the top side of the bottom side of markets. So I think the market did a great job of finding the stops – and in this case finding the weakest ones, which were in the VIX complex – and hitting them. But I don’t think that that really explains why this move happened. Why did we get the first leg down, and why are markets starting to move with very little news flow? And, again, that’s something that’s difficult to explain for a lot of people that are trying to do it.

[..] The biggest problem in the investment industry today, the portfolio construct that investors have come to rely on, which is a brilliant construct really pioneered by Ray Dalio – he naturally has done incredibly well from this, and it’s been a fantastic strategy – this risk parity strategy. And, while there’s certainly more complexity to it that just being long equities and leveraged funds, let’s just view it as that strategy for a moment. It’s essentially what the dominant portfolio has become at all the major investors, pensions, endowments, etc. in the industry. And the beauty of that portfolio has been that you’ve been able to own risk assets and then you’ve been able to own a hedge, which is a leveraged bond portfolio, and that hedge has actually paid you a positive return.

The problem is when equity valuations become very high and interest rates get very low it’s difficult for that strategy to continue to perform very well. All else being equal. Now, however, if you add modest inflation into the formula, that portfolio actually becomes pretty toxic. That’s the environment I think we’re entering into. And that’s why, ultimately, I see some of these shocks like this most recent market shock as just being trail markers on this path to a much more difficult investment environment.

Deputy A.G. Rod Rosenstein: “There is no allegation in the indictment that the charged conduct altered the outcome of the 2016 election.”

Virginia State Senator Richard Black: “When you become a special counsel, you have an open checkbook for the US Treasury and you are guaranteed to become a mega-millionaire if you simply can drag out the proceedings,”

Russian Foreign Minister Sergey Lavrov has again dismissed claims of Russian meddling in the US election, saying that until facts are presented by Washington, they are nothing but “blather.” Speaking at the Munich Security Conference in Germany on Saturday, he said that “Until we see facts, everything else will be just blather.” When asked to comment on the indictment of Russian nationals and companies in the US over alleged meddling in the 2016 US election, the foreign minister answered:“You know, I have no reaction at all because one can publish anything he wants. We see how accusations, statements, statements are multiplying.”

On Friday, a US federal grand jury indicted 13 Russian nationals and three entities accused of interfering in the 2016 election and political processes. According to the indictment, those people were “supporting the presidential campaign of then-candidate Donald J. Trump… and disparaging Hillary Clinton” as they staged political rallies and bought political advertising, while posing as grassroots entities.

[..] Even US Deputy Attorney General Rod Rosenstein had to admit that there were “no allegations” that this “information warfare” yielded any results and affected the outcome of the presidential election. The underwhelming indictment was also slammed in the US. Virginia State Senator Richard Black accused FBI Special Counsel Robert Mueller of deliberately dragging out the Russian meddling probe for his own gain. “To a certain extent, I think, Robert Muller is struggling to keep alive his position of a special counsel. The special counsel has already earned seven million dollars. When you become a special counsel, you have an open checkbook for the US Treasury and you are guaranteed to become a mega-millionaire if you simply can drag out the proceedings,” Black told RT.

“Who’d be a retailer now?” That was the comment from City economist Jeremy Cook when the latest set of grim retail sales data was released by the Office for National Statistics last Friday. “The average Brit,” he added, “has spent the past few years living by the mantra ‘When the going gets tough, the tough go shopping.’” After a grim December, many had been hoping for a bounceback, but the figures showed that consumers were not as hardy as they once were, said Cook, and the retail sector was facing a long-term, continuing slowdown. Shoppers are being hit by declining real wages, record levels of consumer debt and the prospect of higher borrowing costs. But the wider problem is a structural shift in the way consumers spend their money.

This is threatening famous retailers and forcing a rethink about how high streets will look in years to come, and what might be done with retail parks and malls when retailers shut up shop. It is not just about shoppers preferring to buy online – although 20% of fashion sales, where the pressures are perhaps worst, have now moved to the internet. There’s been a seismic shift in the way we spend our time and money. Social media, leisure, travel, eating out, eating in – using takeaways and delivery services – and technology are all taking time and cash that would once have gone straight to shops. In food, increasing numbers of people now prefer to buy local and often. Fewer big weekly shops mean out-of-town superstores are under pressure and the big supermarkets are trying to lure in other retailers to take space they no longer need.

This rapid change in shopping habits is boosting sales at the likes of Amazon, Asos and Boohoo, but forcing radical change on British towns and cities as physical retail space becomes redundant. The past few months have seen a stream of collapses – from fashion store East to shoe chain Shoon and bed specialists Warren Evans and Feather & Black. Toys R Us is teetering on the brink of bankruptcy, while House of Fraser, Debenhams and New Look are all struggling, with all three considering large-scale closures of stores or space.

The Dutch government plans to hire at least 750 new customs agents in preparation for Britain’s exit from the European Union. The Dutch parliament’s Brexit rapporteur, Pieter Omtzigt, who had recommended the move, said both sides of the English Channel had been slow to wake up to the reality that Britain was on course to leave the EU in 14 months’ time. “If we need hundreds of new customs and agricultural inspectors, the British are going to need thousands,” he said. Omtzigt warned that “for a trading nation like the Netherlands, you just cannot afford for customs not to work, it would be a disaster”.

In a letter to parliament on Friday, the deputy finance minister, Menno Snel, said the cabinet had “decided that the Customs and Food and Wares agencies should immediately begin recruiting and training more workers”. He said the government was working on the basis of two scenarios: that Britain leaves the EU with no deal in place, or that it leaves on similar terms to those of the EU’s recent trade deal with Canada. “The results are that … around 930 or 750 full-time employees are needed,” Snel said. “It speaks for itself that the cabinet is following the negotiations closely in order to be able to react appropriately.”

Sir Howard Davies, chairman of the Royal Bank of Scotland (RBS), recently made an astonishing admission on BBC1’s Question Time when he stated that private finance initiatives (PFI) had been a “fraud on the people”. Beyond seemingly populist rhetoric, the real story of PFI reveals that RBS alongside other global banks, notably HSBC, were instrumental in what Sir Howard has effectively labelled a great heist. The past month has seen the demise of construction giant Carillion followed by the collapse of Capita’s market value: both firms having built huge empires by providing outsourced services to public authorities. These initial tremors might be the canary in the coal mine. Profit warnings have been issued for other government contractors, such as Interserve. The domino effect has shades of the 2007-08 financial crisis even though it is clearly not of the same magnitude.

All this has thrown up searching questions, not least around staff redundancies and pensions, bailouts, inflated dividends and executive remuneration. Yet even in the throes of this PFI and outsourcing crisis, public-private Partnerships (PPP) are far from dead and buried. On the contrary, the Naylor Review – a report recommending the disposal of NHS land and assets to generate investment – is rehabilitating PPP. Furthermore, the Government is pushing through Accountable Care Organisations (ACO), a form of PPP based on an American model of healthcare. The Government cites too the model of Alzira in Spain where a consortium of private companies not only financed and built facilities but also delivered health services.

Of course, PFI was not always a toxic brand. In 1997 it appeared to be New Labour’s magical solution to chronic underinvestment in public services in the wake of Thatcherism. As Alan Milburn – the former Labour Health Secretary described by Private Eye as an “almost maniacal convert to PFI” – put it: “It’s PFI or bust.” The argument went that Labour had inherited public services in such a diabolical state of neglect that there was no alternative to the private financing of whole swathes of infrastructure. It was a persuasive argument which seduced many. The Blairite Third Way would somehow square the circle by delivering new schools, hospitals, roads, railways and prisons without the debt or inefficiency of the public sector. It seemed too good to be true yet those who dared to question the orthodoxy du jour were swatted away.

U.S. investigators probing Mercedes maker Daimler have found that its cars were equipped with software which may have help them to pass diesel emissions tests, a German newspaper reported on Sunday, citing confidential documents. There has been growing scrutiny of diesel vehicles since Volkswagen admitted in 2015 to installing secret software on 580,000 U.S. vehicles that allowed them to emit up to 40 times legally allowable emissions while meeting standards when tested by regulators. Daimler, which faces ongoing investigations by U.S. and German authorities into excess diesel emissions, has said investigations could lead to significant penalties and recalls.

The Bild am Sonntag newspaper said that the documents showed that U.S. investigators had found several software functions that helped Daimler cars pass emissions tests, including one which switched off emissions cleaning after 26 km of driving. Another function under scrutiny allowed the emissions cleaning system to recognize whether the car was being tested based on speed or acceleration patterns. Bild am Sonntag also cited emails from Daimler engineers questioning whether these software functions were legal.

The world’s sea ice shrank to a record January low last month as the annual polar melting period expanded, experts say. The 5.04 million square miles of ice in the Arctic was 525,000 square miles below the 1981-to-2010 ice cover average, making it the lowest January total in satellite records, according to the US National Snow and Ice Data Center (NSIDC). Combined with low levels in the Antarctic, global sea ice amounted to a record low for any first month of the year, the organisation concluded. The news comes just days after researchers from the University of Colorado Boulder said the rate at which sea levels are rising was increasing every year, driven mostly by accelerated melting in Greenland and Antarctica.

The NSIDC, a respected authority on the Earth’s frozen regions, which researches and analyses snow, glaciers and ice sheets among other features, said that ice in the Arctic Ocean hit “a new record low” at both the start and end of last month. In an online post, the group said: “January of 2018 began and ended with satellite-era record lows in Arctic sea ice extent, resulting in a new record low for the month. Combined with low ice extent in the Antarctic, global sea ice extent is also at a record low.” It said the Arctic experienced a week of record low daily ice totals at the start of the month, with the January average beating 2017 for a new record low. “Ice grew through the month at near-average rates, and in the middle of the month daily extents were higher than for 2017,” the report went on. “However, by the end of January, extent was again tracking below 2017.”

The orangutan is one of our planet’s most distinctive and intelligent creatures. It has been observed using primitive tools, such as the branch of a tree, to hunt food, and is capable of complex social behaviour. Orangutans also played a special role in humanity’s own intellectual history when, in the 19th century, Charles Darwin and Alfred Russel Wallace, co-developers of the theory of natural selection, used observations of them to hone their ideas about evolution. But humanity has not repaid orangutans with kindness. The numbers of these distinctive, red-maned primates are now plummeting thanks to our destruction of their habitats and illegal hunting of the species. Last week, an international study revealed that its population in Borneo, the animal’s last main stronghold, now stands at between 70,000 and 100,000, less than half of what it was in 1995.

“I expected to see a fairly steep decline, but I did not anticipate it would be this large,” said one of the study’s co-authors, Serge Wich of Liverpool John Moores University. For good measure, conservationists say numbers are likely to fall by at least another 45,000 by 2050, thanks to the expansion of palm oil plantations, which are replacing their forest homes. One of Earth’s most spectacular creatures is heading towards oblivion, along with the vaquita dolphin, the Javan rhinoceros, the western lowland gorilla, the Amur leopard and many other species whose numbers are today declining dramatically. All of these are threatened with the fate that has already befallen the Tasmanian tiger, the dodo, the ivory-billed woodpecker and the baiji dolphin – victims of humanity’s urge to kill, exploit and cultivate.

As a result, scientists warn that humanity could soon be left increasingly isolated on a planet bereft of wildlife and inhabited only by ourselves plus domesticated animals and their parasites. This grim scenario will form the background to a key conference – Safeguarding Space for Nature and Securing Our Future – to be held in London on 27-28 February. The aim of the symposium is straightforward: to highlight ways of establishing sufficient reserves and protected areas to halt or seriously limit the major extinction event that humanity now faces. According to one recent report, the number of wild animals on Earth has halved in the past 40 years, as humans kill for food in unsustainable numbers and pollute or destroy habitats, and worse probably lies ahead.

[..] The current focus on protecting what humans are willing to spare for conservation is unscientific, they say. Instead, conservation targets should be determined by what is necessary to protect nature. This point is stressed by Harvey Locke, whose organisation, Nature Needs Half, takes a far bolder approach and campaigns for the preservation of fully 50% of our planet for wildlife by 2050. “That may seem a lot – if you think the world is a just a place for humans to exploit,” Locke told the Observer. “But if you recognise the world as one that we share with wildlife, letting it have half of the Earth does not seem that much.” The idea is supported by E O Wilson, the distinguished Harvard biologist, in his most recent book, Half Earth. “We thrash about, appallingly led, with no particular goal other than economic growth and unfettered consumption,” he writes. “As a result, we’re extinguishing Earth’s biodiversity as though the species of the natural world are no better than weeds and kitchen vermin.”

The solution, he says, is to fill half the planet with conservation zones – though just how this division is to be decided is not made clear in his book. In any case, Hoffman points out, simply setting aside huge chunks of land or marine areas will not, on its own, save the day. “We could earmark the whole of northern Canada as a wildlife reserve but, given the paucity of animals who live in these frozen regions, that would not have a significant effect on a great many species who live elsewhere,” he said.

Let’s face it: people’s eyes tend to glaze over when someone starts talking about bonds and interest rates. Which is why much of the audience inside the Wallis Annenberg Center for the Performing Arts, and those watching the livestream, probably missed the import of Gundlach’s answer. But the bond market is hugely important. The stock markets get most of the attention from the media, but the bond market, four times the size of the stock market, helps set the price of money. The bond market determines how much you pay to borrow money to buy a home, a car, or when you use your credit cards. The Bond King said the returns on bonds have been anemic at best for the past seven years or so.

While the Dow Jones Industrial Average has nearly quadrupled since March 2009, returns on bonds have averaged something like 2.5% for treasuries and something like 8.5% for riskier “junk” bonds. Gundlach urged investors to be “light” on bonds. Of course, that makes the irony especially rich for the Bond King. “I’m stuck in it,” he said of his massive bond portfolio. He said interest rates have bottomed out and been rising gradually for the past six years. (Rising interest rates hurt the value of the bonds you own, as bonds trade in inverse proportion to their yield. Snore . . .) Gundlach said his job now, on behalf of his clients, “is to get them to the other side of the valley.” When the bigger, seemingly inevitable hikes in interest rates come, “I’ll feel like I’ve done a service by getting people through,” he said. “That’s why I’m still at the game. I want to see how the movie ends.”

But it can’t end well. To illustrate his point about the risk in owning bonds these days, Gundlach shared a chart that showed how investors in European “junk” bonds are willing to accept the same no-default return as they are for U.S. Treasury bonds. In other words, the yield on European “junk” bonds is about the same—between 2% and 3%—as the yield on U.S. Treasuries, even though the risk profile of the two could not be more different. He correctly pointed out that this phenomenon has been caused by “manipulated behavior”—his code for the European Central Bank’s version of the so-called “quantitative easing” program that Ben Bernanke, the former chairman of the Federal Reserve, initiated in 2008 and that Mario Draghi, the head of the E.C.B., has taken to heart.

Bernanke’s idea was to have the Federal Reserve buy up trillions of dollars of bonds, increasing their price and lowering their yields. He figured lower interest rates would help jump-start an economy in recession. Whereas Janet Yellen, Bernanke’s successor, ended the Fed’s Q.E. program in 2014, Draghi’s version of it is still going, which has led to the “manipulation” that so concerns Gundlach. European interest rates “should be much higher than they are today,” he said, “. . . [and] once Draghi realizes this, the order of the financial system will be turned upside down and it won’t be a good thing. It will mean the liquidity that has been pumping up the markets will be drying up in 2018 . . . Things go down. We’ve been in an artificially inflated market for stocks and bonds largely around the world.”

Before the crisis, there was still a strong belief that stock investing entailed real risk. The period of stock stagnation of the 1970s and 1980s was still well remembered, as were the crashes of 1987, 2000, and 2008. But the existence of the Greenspan/Bernanke/Yellen “Put” (the idea that the Fed would back stop market losses), came to ease many of the anxieties on Wall Street. Over the past few years, the Fed has consistently demonstrated that it is willing to use its new tool kit in extraordinary ways. While many economists had expected the Fed to roll back its QE purchases as soon as the immediate economic crisis had passed, the program steamed at full speed through 2015, long past the point where the economy had apparently recovered. Time and again, the Fed cited fragile financial conditions as the reason it persisted, even while unemployment dropped and the stock market soared.

The Fed further showcased its maternal instinct in early 2016 when a surprise 8% drop in stocks in the first two weeks of January (the worst ever start of a calendar year on Wall Street) led it to abandon its carefully laid groundwork for multiple rate hikes in 2016. As investors seem to have interpreted this as the Fed leaving the safety net firmly in place, the VIX has dropped steadily from that time. In September of this year, the VIX fell below 10. Untethered optimism can be seen most clearly by looking at the relationship between the VIX and the CAPE ratio. Over the past 27 years, this figure has averaged 1.43. But just this month, the ratio approached 3 for the first time on record, increasing 100% in just a year and a half. This means that the gap between how expensive stocks have become and how little this increase concerns investors has never been wider. But history has shown that bad things can happen after periods in which fear takes a back seat.

Investors may be trying to convince themselves that the outcome will be different this time around. But the only thing that is likely to be different is the Fed’s ability to limit the damage. In 2000-2002, the Fed was able to cut interest rates 500 basis points (from 6% to 1%) in order to counter the effects of the imploding tech stock bubble. Seven years later, it cut rates 500 basis points (from 5% to 0) in response to the deflating housing bubble. Stocks still fell anyway, but they probably would have fallen further if the Fed hadn’t been able to deliver these massive stimuli. In hindsight, investors would have been wise to move some funds out of U.S. stocks when the CAPE/VIX ratio moved into record territory. While stocks fell following those peaks, gold rose nicely.

Past performance is not indicative of future results. Created by Euro Pacific Capital from data culled from Bloomberg.

But interest rates are now at just 1.25%. If the stock market were again to drop in such a manner, the Fed has far less fire power to bring to bear. It could cut rates to zero and then re-launch another round of QE bond buying to flood the financial sector with liquidity. But that may not be nearly as effective as it was in 2008. Given that the big problem at that point was bad mortgage debt, the QE program’s purchase of mortgage bonds was a fairly effective solution (although we believe a misguided one). But propping up overvalued stocks, many of which have nothing to do with the financial sector, is a far more difficult challenge. The Fed may have to buy stocks on the open market, a tactic that has been used by the Bank of Japan.

Real Vision released a video early today containing interviews with some of the biggest names in the hedge fund universe. Though the interview was shot a few weeks ago, remarks from Hayman Capital’s Kyle Bass resonated with market’s mood. Bass discussed what he sees as the many short- and long-term risks to the US equity market, including the rise of algorithmic trading and passive investment, which have enabled investors to take risks without understanding what they’re doing, leaving the market vulnerable to an “air pocket.” And with so many traders short vol, Bass said investors will know the correction has begun when a 4% or 5% drop in equities snowballs into a 10% to 15% decline at the drop of a hat.

“The shift from active to passive means that risk is in the hands of people who don’t know how to take risk. Therefore we’re likely to have a 1987 air pocket. This is like portfolio insurance on steroids, the way algorithmic trading is now running the market place. Investors are moving from active to passive, meaning they’re taking the wheel themselves all at a time when CTAs are running their own algo strategies where they’re one and a half times long and half short and they all believe they can come out at the same time.” “If you see the equity market crack 4 or 5 points, buckle up, because I think we’re going to see a pretty interesting air-pocket, and I don’t think investors are ready for that,” Bass said.

“Our trade relationship with China is worsening our relationship with north korea whatever it is continually worsens. We’ve got three people at the head of these countries that are trying ot maike their countries great again, I think that’s a real risk geopolitically.” “But when you think about it financially, which is actually easier to calculate, the financial reason is the G-4 central banks going from a period of accommodation to a period of tightening, and that’s net of bond issuance.

A key dynamic that’s been holding down bond yields since the global financial crisis is poised to ease next year – presenting a test to riskier parts of the market, according to analysis by Oxford Economics. In the aftermath of the crisis, banks and shadow financial institutions in developed economies sharply cut back their issuance of bonds, to the tune of about $4 trillion, according to the research group’s tally. That happened thanks to banks shrinking their balance sheets amid a regulatory crackdown, and due to a contraction in supply of mortgages that were regularly securitized into asset-backed bonds. “Against stable demand for fixed-income securities, the large negative supply shock created an increasingly acute shortage of these assets,” said Guillermo Tolosa, an economic adviser to Oxford Economics in London who has worked at the IMF.

The impact of that shock was an “almost decade-long yield squeeze,” he wrote. That compression “may start to ease in 2018,” Tolosa wrote in a report distributed Tuesday. Using slightly different metrics, the chart below shows how the market for financial company debt securities in the Group of Seven nations shrank after the 2009 global recession, and now appears to have flat-lined. Continued demand among mutual funds, pensions and insurance companies for fixed income then created the opportunity for nonfinancial companies to ramp up issuance, Tolosa wrote – a dynamic also seen in the chart. It’s one of a number of supply factors that have been identified explaining why bond yields globally remain historically low. Perhaps the most well documented one is the QE programs by the Fed, ECB and Bank of Japan that gobbled up about $14 trillion of assets.

Tolosa’s analysis suggests that Fed QE has had less of an impact than generally accepted, as the initiative was “more than offset” by increased public-sector borrowing. The large portfolio rebalancing in fixed income was instead “essentially a switch within private sector securities,” he said. There was a “massive shift” from financial securities into Treasuries, along with nonfinancial corporate and overseas debt, Tolosa concluded. “This explains a considerable part of the post-crisis surge in demand for other spread products and the issuance boom for global nonfinancial corporates and emerging-market borrowers,” Tolosa wrote. Over the decade through 2007, 10-year U.S. Treasury yields averaged 4.85%. But since the start of 2009 they’ve averaged just 2.46% – giving investors incentives to find higher rates elsewhere.

The U.S. budget deficit widened to $666 billion for the fiscal year 2017 as record spending more than offset record receipts, the Treasury Department said on Friday. The 2017 deficit increased to 3.5% of gross domestic product. The previous fiscal year deficit was $586 billion, with a deficit-to-GDP ratio of 3.2%. The latest fiscal year, which ended Sept. 30, straddled the presidencies of Barack Obama, a Democrat, and Donald Trump, a Republican. Accounting for calendar adjustments, the 2017 fiscal year deficit was $644 billion compared with $546 billion the prior year. Fiscal 2017 revenues increased 1% to $3.315 trillion, while spending rose 3% to $3.981 trillion. Since taking office in January, the Trump administration has sought to overhaul the U.S. tax code with precise details currently being worked on in Congress.

The Republican tax plan currently calls for as much as $6 trillion in tax cuts, which would sharply reduce government revenues. It has prompted criticism that it favors tax breaks for business and the wealthy and could add trillions of dollars to the deficit. The administration contends tax cuts will pay for themselves by boosting economic growth. In addition to the annual deficit, the national debt – the accumulation of past deficits and interest due to lenders to the Treasury – now exceeds $20 trillion. The non-partisan Congressional Budget Office has said the ever-rising debt levels are unsustainable as the government pays for the medical and retirement costs of the aging Baby Boomer generation.

Federal Reserve Chair Janet Yellen said on Friday that asset purchases and other unconventional policy tools must remain part of the Fed’s arsenal as long as the economy remains stuck in a low interest-rate economy. Yellen’s remarks offered a contrast between her legacy as Fed chair with the policy views of others who President Donald Trump is considering for her position when her term expires in February. Yellen told the National Economists Club, “We must keep our unconventional policy tools ready to be deployed again.” Reaching the near-zero lower bound would force the Fed to turn to other means to stimulate the economy. Following the 2007 to 2009 financial crisis, the Fed used both a spoken commitment to lower rates and $3.5 trillion in asset purchases to pull rates lower than they would have been otherwise, boosting consumption and growth.

Those asset holdings are now on the decline, the Fed’s policy rate is being increased, and the economy in general is doing well, Yellen said. But she cautioned that the world may not return to its old normal, and “future policymakers” may need to use emergency steps similar to those used in the past decade. Persistent low inflation has caught the Fed by surprise and is “of great concern,” Yellen said. She and other Fed officials are also convinced that the “neutral” rate, which neither stimulates nor discourages economic activity, is much lower than in the past, likely limiting how far the Fed can go during this rate increase cycle. As President Donald Trump mulls a switch at the Fed, Trump is considering several possible replacements for Yellen.

One of the possible nominees Trump has interviewed, former Fed Governor Kevin Warsh, was critical of Fed asset purchases at the time, and argued that Fed has stayed too deeply involved in asset markets. Another, Stanford Economist John Taylor, advocates use of an interest rate rule that would have recommended higher rates through the downturn and recovery. Once rates reach the lower bound, moreover, Taylor’s rule-based approach would likely have to give way to judgment about what steps to take.

Marc Faber, the markets prognosticator known as “Dr. Doom,” has been dismissed from three more company boards after comments in his latest newsletter this week suggested the United States had only prospered because it was settled by white people. U.S-based Sunshine Silver Mining, Vietnam Growth Fund managed by Dragon Capital, and Indochina Capital Corporation, had all dismissed him, Faber told Reuters on Friday, Faber has now been fired from six boards with Canadian fund manager Sprott, NovaGold Resources and Ivanhoe Mines letting him go on Tuesday after his remarks went viral on social media platform Twitter. In the October edition of his newsletter, “The Gloom, Boom & Doom Report,” in a section discussing capitalism versus socialism, Faber criticized the move to tear down monuments commemorating the U.S. Civil War military leaders of the Confederacy.

“Thank God white people populated America, not the blacks,” Faber wrote in his newsletter. “Otherwise, the U.S. would look like Zimbabwe, which it might look like one day anyway, but at least America enjoyed 200 years in the economic and political sun under a white majority.” “I am not a racist,” Faber continued, “but the reality – no matter how politically incorrect – needs to be spelled out as well.” Faber, a Swiss investor based in Thailand, who oversees $300 million in assets, said he has not lost any client money, and still stands by his comments and will keep publishing his newsletter. ”My clients all know me for more than 30 years. They know that to call me a racist is inappropriate,” he said. Faber said he has not seen a significant amount of subscribers cancel their subscriptions to his newsletter as a result of the controversy. “No, I think most people actually agree with me and certainly defend freedom of expression even if it does not coincide with their views.”

The World Bank’s former country director for China has defended the organization’s lending to Chinese governments. Yukon Huang, who now serves as a senior fellow at the Carnegie Asia Program, made the remarks after reports said the U.S. has rejected a capital increase plan for the multilateral lender because of dissatisfaction with its loans to wealthier countries, including China. The provincial-level and local governments need the World Bank loans because structural impediments prevent domestic banks from providing sufficient credit to finance public projects, Huang said. Chinese governments that borrow from the World Bank benefit from the support, Huang told Caixin. For example, he said, loans help agencies finance public services without having to rely so much on land sale revenues.

World Bank loans also help those governments improve their debt management. World Bank funds made available in January through its Development Policy Financing program are now helping governments within Hunan province and the municipality of Chongqing “achieve fiscal sustainability through a comprehensive and transparent public finance framework that integrates budget, public investment and debt management,” according to a statement on the World Bank’s website. For two years, the World Bank Group had been working to get member countries to agree on a capital increase plan for its International Bank for Reconstruction and Development (IBRD) lending arm before the 2017 World Bank and IMF annual meetings, which began last week, according to Reuters.

The IBRD, the world’s largest development bank, is dedicated to helping countries reduce poverty and extending the benefits of sustainable growth by providing them with financial products and policy advice, its official website says. The U.S. is currently the largest IBRD shareholder out of its 189 member nations, with the greatest voting power of 16.28%. China is the third-largest shareholder, after Japan, with 4.53% voting power. The Trump administration was reluctant to endorse the capital increase, with U.S. Treasury Secretary Steven Mnuchin saying in an Oct. 13 statement that “more capital is not the solution when existing capital is not allocated effectively.” “We want to see a significant shift in allocation of funding to support countries most in need of development finance,” Mnuchin said.

The Most Serene Republic, as the area around Venice was known for a millennium, is now the troubled epicenter of a banking meltdown that’s threatening to derail one of globalization’s great success stories. The base of brands like Benetton, De’Longhi, Geox and Luxottica, Veneto has also become home to as many as 40,000 small businesses suddenly stranded without access to financing since a pair of regional banks collapsed in June. The implosions of Popolare di Vicenza and Veneto Banca, which also wiped out the life savings of many of their 200,000 shareholders, set off economic and political tremors felt from Rome to Frankfurt. Anger over what many view as lax oversight by national authorities is animating a movement for more autonomy that’s already emboldened by Catalonia’s efforts to split from Spain.

“The pain for Veneto’s banks may be over, but the pain for Veneto’s businesses is just beginning,” said Andrea Arman, a lawyer advising some of the companies and individuals who’ve been hit the hardest. “We’re just starting to see the consequences of the collapse and what we’re seeing is alarming.” Nestled between the Alps and the Adriatic, Veneto is home to about 5 million people. Like Catalonia, it has a seafaring heritage, its own language and incomes far above the national average. Veneto President Luca Zaia, who’s called Italy and its 64 governments in 71 years a “bankrupt state,” plans to use the results of a nonbinding referendum on Oct. 22 to press Rome for more autonomy. Three out of four Veneti want more local power and 15% would support complete independence, according to a Demos poll published by La Repubblica this week.

While Intesa Sanpaolo SpA, Italy’s second-largest bank, paid a symbolic sum to acquire the healthiest parts of the two Veneto lenders, the state entity that’s absorbing the 18 billion euros ($21.3 billion) of troubled debt the banks amassed, called SGA, isn’t fully operational yet. That has left small and midsized companies in the lurch—in many cases unable to do business. “Many of these borrowers are profitable companies, but they’re stuck in limbo,” said Mauro Rocchesso, head of Fidi Impresa e Turismo Veneto, a financial firm that provides collateral to companies seeking lines of credit. “They don’t have a counterparty anymore and can’t find fresh capital from a new lender because of their exposure to the two Veneto banks.”

Catalan separatists say Spanish Prime Minister Mariano Rajoy doesn’t know what he’s getting himself into as he moves to quash their campaign for independence. As the government in Madrid prepares to deploy its most powerful legal weapons, three leading members of the movement in Barcelona said Rajoy isn’t equipped to achieve his goals and risks a damaging entanglement in hostile terrain. They reckon they have enough support among the Catalan civil service and police to thwart Spain’s plan. Rajoy’s cabinet meets in Madrid on Saturday to consider specific measures to reassert control over the rebel region, a process set out in the Spanish Constitution that’s never yet been tested. Among the top priorities is bringing to heel the Catalan police force and deciding what to do with President Carles Puigdemont.

The plan still needs approval by the Senate, so it could be another two weeks before Spain can take any action. “This is a minefield for Rajoy,” said Antonio Barroso, an analyst in London at Teneo Intelligence, a company advising on political risk. “The implementation on the ground is a risk for him when the government may face some regional civil servants who don’t cooperate.” The three Catalan officials – one from the parliament, one from the regional executive and one from the grass-roots campaign organization – spoke on condition of anonymity due to the legal threats against the movement. It all comes down to Article 155 of the constitution, a short passage that gives the legal green light for Spain to revoke the semi-autonomy of Catalonia. Foreign Minister Alfonso Dastis said at a press conference in Madrid on Friday that it would be applied in a “prudent, proportionate and gradual manner.”

The problem for Rajoy is that the separatists already proved with their makeshift referendum on Oct. 1 that they can ignore edicts from Madrid with a degree of success. That means he will need to back up his ruling with people on the ground, and it didn’t work as planned the last time around. The Catalan police force, the Mossos d’Esquadra, ignored orders to shut down polling stations before the illegal vote on Oct. 1. After Rajoy sent in the Civil Guard, images of Spanish police beating would-be voters were broadcast around the world. Mossos Police Chief Josep Lluis Trapero is a local hero, his face worn on T-shirts at separatist demonstrations. When he returned this week from an interrogation in Madrid, where he’s facing possible sedition charges, staff greeted him with hugs and applause.

They are multitudinous almost beyond our imagining. They thrive in soil, water, and air; they have triumphed for hundreds of millions of years in every continent bar Antarctica, in every habitat but the ocean. And it is their success – staggering, unparalleled and seemingly endless – which makes all the more alarming the great truth now dawning upon us: insects as a group are in terrible trouble and the remorselessly expanding human enterprise has become too much, even for them. The astonishing report highlighted in the Guardian, that the biomass of flying insects in Germany has dropped by three quarters since 1989, threatening an “ecological Armageddon”, is the starkest warning yet; but it is only the latest in a series of studies which in the last five years have finally brought to public attention the real scale of the problem.

Does it matter? Even if bugs make you shudder? Oh yes. Insects are vital plant-pollinators and although most of our grain crops are pollinated by the wind, most of our fruit crops are insect-pollinated, as are the vast majority of our wild plants, from daisies to our most splendid wild flower, the rare and beautiful lady’s slipper orchid. Furthermore, insects form the base of thousands upon thousands of food chains, and their disappearance is a principal reason why Britain’s farmland birds have more than halved in number since 1970. Some declines have been catastrophic: the grey partridge, whose chicks fed on the insects once abundant in cornfields, and the charming spotted flycatcher, a specialist predator of aerial insects, have both declined by more than 95%, while the red-backed shrike, which feeds on big beetles, became extinct in Britain in the 1990s. Ecologically, catastrophe is the word for it.

[..] It seems indisputable: it is us. It is human activity – more specifically, three generations of industrialised farming with a vast tide of poisons pouring over the land year after year after year, since the end of the second world war. This is the true price of pesticide-based agriculture, which society has for so long blithely accepted. So what is the future for 21st-century insects? It will be worse still, as we struggle to feed the nine billion people expected to be inhabiting the world by 2050, and the possible 12 billion by 2100, and agriculture intensifies even further to let us do so. You think there will be fewer insecticides sprayed on farmlands around the globe in the years to come? Think again. It is the most uncomfortable of truths, but one which stares us in the face: that even the most successful organisms that have ever existed on earth are now being overwhelmed by the titanic scale of the human enterprise, as indeed, is the whole natural world.

Quarterly figures released by Greece’s statistical authority (ELSTAT) last week point to a range of interesting, albeit worrying, trends. Beyond the economy (the surpluses, the debt and the gross domestic product, which appears to be on the slow path of recovery after a decade of constant decline), ELSTAT’s “Greece in Numbers” survey highlights a multitude of structural shortcomings and widespread impoverishment that are undermining the country’s long-term prospects. Demographic trends are among ELSTAT’s most alarming findings. According to the survey, Greece’s dependency ratio – which acts as an indicator of the balance between the working population and older people typically supported by it – has increased from 51.8 in 2011 to 55.2 in 2015 (most recent data).

Meanwhile, the aging index, or the proportion of persons aged 60 years and above per 100 persons under the age of 15, rose from 132.9 in 2011 to 145.5 in 2015. Over the same period, the fertility index dropped from 1.5 to 1.3. (2.1 live births per woman is considered the replacement level in developed countries). Greece had a negative birth to death ratio every year in the past five years, as the deficit rose from 16,297 in 2012 to 29,365 in 2015 (the number last year declined to 25,894). In 2016, moreover, the Greek unemployment rate was 23.5% of the workforce (1.195 million people) – the lowest in five years. However, jobless numbers remain extremely high, with the highest figure being recorded in 2013 at 1.33 million unemployed persons, or 27.5% of the workforce.

ELSTAT data on long-term unemployment expose another dramatic dimension of the crisis, as the rate of people out of work for 12 months or more climbed from 59.1% in 2012 to 72% in 2016. The overwhelming majority of these people receive no state benefits. The belt-tightening imposed by the country’s lingering recession is confirmed by data on average monthly household spending on goods and services. Spending has plunged from 1,824.02 euros in 2011 to 1,419.57 euros in 2015. Meanwhile, annual household expenditure on health (which tends to be inelastic) dipped from 114.58 euros to 107.06 euros over the same period. However, annual spending on food has seen a sharp decline from 355.05 euros to 293.30 euros, while spending on hotels, cafes and restaurants has also dropped from 189.11 euros to 141.05 euros.

ELSTAT figures also show a spike in the share of the population that is deprived of at least three out of nine material necessities due to financial difficulties – the ability to pay unexpected expenses, to take a one-week annual holiday away from home, to enjoy a meal involving meat, chicken or fish every second day, to have adequate heating for their home, to purchase durable goods like a washing machine, color television, telephone or car, to cover payment arrears for the mortgage or rent, utility bills, hire purchase installments or other loan payments. This figure rose from 28.4% in 2011 to 38.5% last year (42.3% among persons aged up to 17 years old).

New revelations about Tesla’s production of the highly anticipated Model 3 sedan should shock, but not surprise, investors. The Wall Street Journal reported Friday that Tesla has recently been building major portions of the Model 3 by hand. This comes less than a week after Tesla announced it fell short of its third-quarter production guidance of 1,500 cars by more than 80%. At the time, Tesla attributed the shortfall to “production bottlenecks.” On Friday, Tesla said it would postpone its launch event for a new truck to November to deal with Model 3 issues and to help provide assistance to Puerto Rico. Tesla Chief Executive Elon Musk is known as a risk-taker, which has endeared him to Wall Street analysts and investors alike.

There is a fine line, however, between setting aggressive goals and misleading shareholders. Tesla is inching closer to that line. Tesla was making three Model 3s on an average day in the third quarter. Mr. Musk should have known in August, when production guidance was reiterated, that the company wasn’t going to produce 1,500 Model 3s by the end of September. There are other examples. At the Model 3 launch event in July, he told reporters that Tesla had received more than 500,000 customer deposits for the car. Five days later, after a series of questions from The Wall Street Journal, Mr. Musk revised that number to 455,000 on a conference call with investors. The earlier, higher figure he quoted had been “just a guess.”

Last year, a Reuters article brought renewed scrutiny to the budgeting practices of the U.S. Department of Defense (DOD), specifically the U.S. Army, after it was revealed that the department had “lost” $6.5 trillion in 2015 due to “wrongful budget adjustments.” Nearly half of that massive sum, $2.8 trillion, was lost in just one quarter. Reuters noted that the Army “lacked the receipts and invoices to support those numbers [the adjustments] or simply made them up” in order to “create an illusion that its books are balanced.” Officially, the DOD has acknowledged that its financial statements for 2015 were “materially misstated.” However, this was hardly the first time the department had been caught falsifying its accounting or the first time the department had mishandled massive sums of taxpayer money.

The cumulative effect of this mishandling of funds is the subject of a new report authored by Dr. Mark Skidmore, a professor of economics at Michigan State University, and Catherine Austin Fitts, former assistant secretary of housing. Their findings are shocking. The report, which examined in great detail the budgets of both the DOD and the Department of Housing and Urban Development (HUD), found that between 1998 and 2015 these two departments alone lost over $21 trillion in taxpayer funds. The funds lost were a direct result of “unsupported journal voucher adjustments” made to the departments’ budgets. According to the Office of the Comptroller, “unsupported journal voucher adjustments” are defined as “summary-level accounting adjustments made when balances between systems cannot be reconciled.

Often these journal vouchers are unsupported, meaning they lack supporting documentation to justify the adjustment [receipts, etc.] or are not tied to specific accounting transactions.” The report notes that, in both the private and public sectors, the presence of such adjustments is considered “a red flag” for potential fraud. The amount of money lost is truly staggering. As co-author Fitts noted in an interview with USA Watchdog, the amount unaccounted for over this 17 year period amounts to “$65,000 for every man, woman and child resident in America.” By comparison, the cost per taxpayer of all U.S. wars waged since 9/11 has been $7,500 per taxpayer. The sum is also enough to cover the entire U.S. national debt, which broke $20 trillion less than a month ago, and still have funds left over. What’s more, the actual amount of funds lost — measured at $21 trillion – is likely to be much higher, as the researchers were unable to recover data for every year over the period, meaning the assessment is incomplete.

China’s anti-graft watchdog said roughly 1.34 million lower-ranking officials have been punished since 2013 under President Xi Jinping’s anti-corruption drive. Xi, who is preparing for a major Communist Party leadership conference later this month, has made an anti-graft campaign targeting “tigers and flies,” both high and low ranking officials, a core policy priority during his five-year term. China is preparing for the 19th Congress later this month, a twice-a-decade leadership event where Xi is expected to consolidate power and promote his policy positions.

Those punished for graft since 2013 include 648,000 village-level officials and most crimes were related to small scale corruption, said the Central Commission for Discipline Inspection (CCDI) on Sunday. While much of the country’s anti-graft drive has targeted lower ranking village and county officials, several high-ranking figures have been taken down. In August the head of the anti-graft committee for China’s Ministry of Finance was himself put under investigation for suspected graft.

Switzerland and the UK have mandatory retirement pre-funding with private management and modest public safety nets, as do Denmark, the Netherlands, Sweden, Poland, and Hungary. Not that all of these countries don’t have problems, but even with their problems, these European nations are far better off than some others. The European nations noted above have nowhere near the crisis potential that the next group does: France, Belgium, Germany, Austria, and Spain. They are all pay-as-you-go countries (PAYG). That means they have nothing saved in the public coffers for future pension obligations, and the money has to come out of the general budget each year. The crisis for these countries is quite predictable, because the number of retirees is growing even as the number of workers paying into the national coffers is falling.

Let’s look at some details. Spain was hit hard in the financial crisis but has bounced back more vigorously than some of its Mediterranean peers did, such as Greece. That’s also true of its national pension plan, which actually had a surplus until recently. Unfortunately, the government chose to “borrow” some of that surplus for other purposes, and it will soon turn into a sizable deficit. Just as in the US, Spain’s program is called Social Security, but in fact it is neither social nor secure. Both the US and Spanish governments have raided supposedly sacrosanct retirement schemes, and both allow their governments to use those savings for whatever the political winds favor.

The Spanish reserve fund at one time had €66 billion and is now estimated to be completely depleted by the end of this year or early in 2018. The cause? There are 1.1 million more pensioners than there were just 10 years ago. And as the Baby Boom generation retires, there will be even more pensioners and fewer workers to support them. A 25% unemployment rate among younger workers doesn’t help contributions to the system, either. Overall, public pension plans in the pay-as-you-go countries would now replace about 60% of retirees’ salaries. Plus, several of these countries let people retire at less than 60 years old. In most countries, fewer than 25% of workers contribute to pension plans. That rate would have to double in the next 30 years to make programs sustainable. Sell that to younger workers.

I have to warn you: You may be hopping mad when you finish reading this. In the United States we have two national programs to care for the elderly. Social Security provides a small pension, and Medicare covers medical expenses. All workers pay taxes that supposedly fund the benefits we may someday receive. That’s actually not true, as we will see in a little bit. Neither of these programs is comprehensive. Living on Social Security benefits alone is a pretty meager existence. Medicare has deductibles and copayments that can add up quickly. Both programs assume people have their own savings and other resources. Nevertheless, the programs are crucial to millions of retirees, many of whom work well past 65 just to keep up with their routine expenses. This chart from my friend John Burns shows the growing trend among generations to work past age 65. Having turned 68 a few days ago, I guess I’m contributing a bit to the trend:

Limited though Social Security and Medicare are, we attribute one huge benefit to them: They’re guaranteed. Uncle Sam will always pay them – he promised. And to his credit, Uncle Sam is trying hard to keep his end of the deal. In fact, he’s running up debt to do so. Actually, a massive amount of debt. Federal debt as a percentage of GDP has almost doubled since the turn of the century. The big jump occurred during the 2007–2009 recession, but the debt has kept growing since then. That’s a consequence of both higher spending and lower GDP growth. In theory, Social Security and Medicare don’t count here. Their funding goes into separate trust funds. But in reality, the Treasury borrows from the trust funds, so they simply hold more government debt.

The Treasury Department tracks all this, and you can read about it on their website, updated daily. Presently it looks like this: • Debt held by the public: $14.4 trillion • Intragovernmental holdings (the trust funds): $5.4 trillion • Total public debt: $19.8 trillion. Total GDP is roughly $19.3 trillion, so the federal debt is about equal to one full year of the entire nation’s collective economic output. In fact, it’s even more when you consider that GDP counts government spending as “production,” even when Uncle Sam spends borrowed money. Of course, that total does not count the $3 trillion-plus of state and local debt, which in almost every other country of the world is included in their national debt numbers. Including state and local debt in US figures would take our debt-to-GDP above 115%. And rising.

An old statute requires the Treasury to issue an annual financial statement, similar to a corporation’s annual report. The FY 2016 edition is 274 enlightening pages that the government hopes none of us will read. Among the many tidbits, it contains a table on page 63 that reveals the net present value of the US government’s 75-year future liability for Social Security and Medicare. That amount exceeds the net present value of the tax revenue designated to pay those benefits by $46.7 trillion. Yes, trillions. Where will this $46.7 trillion come from? We don’t know. Future Congresses will have to find it somewhere. This is the fabled “unfunded liability” you hear about from deficit hawks. Similar promises exist to military and civil service retirees and assorted smaller groups, too. Trying to add them up quickly becomes an exercise in absurdity.

When I came to live in London with my family in 2011 I did not have to think of a work or residency permit. My children quickly found an excellent state primary school, and after a handful of calls we enjoyed free healthcare, and the right to vote in local elections. The only real bureaucratic hassle we encountered that warm summer concerned a permit to park. It all seemed so smooth compared to earlier moves to the United States, Egypt, Lebanon and Israel/Palestine. Then again, this time we were moving in with our cousins—weren’t we? We had arrived as fellow Europeans, but when we left this summer to return to the Netherlands we felt more like foreigners: people tolerated as long as they behave. At best we were “European Union nationals” whose rights would be subject to negotiations—bargaining chips in the eyes of politicians.

As we sailed from Harwich, it occurred to me that our departure would be counted by Theresa May as five more strikes towards her goal of “bringing down net immigration to the tens of thousands.” The Dutch and the British have a lot in common, at first sight. Sea-faring nations with a long and guilty history of colonial occupation and slavery, they are pro free-trade and have large financial service industries—RBS may even move its headquarters to Amsterdam. Both tend to view American power as benign; the Netherlands joined the occupations of Afghanistan and Iraq. Shell, Unilever and Elsevier are just three examples of remarkably successful Anglo-Dutch joint ventures. I say “remarkably” because I’ve learned that in important respects, there is no culture more alien to the Dutch than the English (I focus on England as I’ve no experience with Wales, Scotland or Northern Ireland).

Echoing the Calvinist insistence on “being true to oneself,” the Dutch are almost compulsively truthful. Most consider politeness a cowardly form of hypocrisy. Bluntness is a virtue; insincerity and backhandedness are cardinal sins. So let me try to be as Dutch as I can, and say that I left the UK feeling disappointed, hurt and immensely worried. We did not leave because of Brexit. My wife and I are both Dutch and we want our children to grow roots in the country where we came of age. We loved our time in London and have all met people who we hope will become our friends for life. But by the time the referendum came, I had become very much in favour of the UK leaving the EU. The worrying conditions that gave rise to the result—the class divide and the class fixation, as well as an unhinged press, combine to produce a national psychology that makes Britain a country you simply don’t want in your club.

Amongst politicians as well as writers, a passing reference to fallen empires could invoke the aura of national decline far more efficiently than any statistic. As the 1950s gave way to the 60s, decolonisation picked up pace, and Ian Macleod, the pragmatic Colonial Secretary, did not stand in the way. But he did—perhaps ruefully—recall how the vanishing empire had once brought “consolation” to “this bright little, tight little island.” What was at stake was not any specific longing for a particular colonial enclave, but a generalised feeling of relegation to the confined spaces of England. Many a contemporary British observer advocated “going into Europe” as the only way to break this cycle of confusion and self-hatred. It took three attempts, with first Harold Macmillan and then Wilson being given the “Non” before Edward Heath finally secured entry in 1973.

With a bold commitment to a new corporate enterprise, it was hoped Britain’s lost latitude could at last be restored. Any material prosperity at stake seemed almost incidental to the emotional shock therapy that lay in store. The deed was done with little regard for the future of Australian butter or New Zealand lamb, but these were sentimental hankerings that most in Britain could happily do without. More recently, however, the tables have turned. The once liberating tonic of “Europe” has come to be seen as the cause of Britain’s confinement. What the likes of Hartley would have made of the current fetish for “Global Britain” leaves little to the imagination. Despite the passing of nearly 60 years, concerns about the proper scale of Britain not only permeate the airwaves but also play directly into political decision-making.

Take the overwhelming support for Trident in the House of Commons, for example, and the widespread belief, which defies publicly-available information about how its maintenance entirely depends on US goodwill, that it constitutes an “independent” nuclear deterrent. Consider, too, the endlessly-repeated claim, earnestly mouthed by ministers of all stripes as a self-evident truth, that the UK must somehow “punch above its weight on the world stage.” And consider, most pressingly, the suggestion that the rest of the world will be excited by the chance to haggle a bespoke British trade deal, despite ample indications to the contrary and the obvious perils of jeopardising access to the world’s largest single market for such risky returns.

Madrid will use all legal means to stop Catalonia’s secession, PM Mariano Rajoy said, ruling out talks with separatists and vowing to keep federal police in the region, where 800 people were injured in a crackdown on last week’s independence referendum. In an interview with El Pais newspaper on Saturday, Spanish Prime Minister Rajoy indicated that he is not going to back down from his tough stance on Catalonia’s independence, reiterating that until the regional government abandons its intention to proclaim independence, no talks can take place. “As long as it does not go back to legality, I certainly will not negotiate,” Rajoy said, adding that while the Spanish government appreciates proposals to mediate between the national and Catalan governments, it will have to reject them.

“I would like to say one thing about mediation: we do not need mediators. What we need is that whoever is breaking the law and whoever has put themselves above the law rectifies their position,” the PM said. Rajoy further said that the national government will do whatever it takes to ensure that an independent Catalonia never happens. “We are going to prevent independence from occurring. That is why I can tell you with absolute frankness that it will not happen,” he said, adding that Madrid is within its rights to “take any decisions that the laws allow us,” depending on the way the crisis unravels. One of the actions that the Spanish government is considering taking if necessary is the enforcement of Article 155 of the Spanish Constitution, which enables the prime minister to dissolve the Catalonian government and call for snap local elections.

“I do not rule out anything that the law says,” Rajoy said of the option, adding that there is “no risk at all” that Spain will disintegrate. “Spain will not be divided and national unity will be maintained. We will use all the instruments that the legislation gives us,” he said. [..] The Catalonia dispute should be considered a challenge not only to Spain but also to the “great European project,” Rajoy argued, calling it “the battle of Europe.” “The battle of European values is under way and we have to win it,” he said, drawing parallels between such challenges to the European project from populist and separatist sentiments that have been gaining traction in Europe recently.

Poland does not agree to the European Union ordering countries to accept “forcibly relocated” migrants, President Andrzej Duda has said, warning that splits in the bloc could bring about its collapse. After Thursday’s talks with his Bulgarian counterpart in Warsaw, Duda said the European Union’s rules of unity mean “we work together … we do not try to force other countries into acting against their will and against their people”. “Which is why we do not agree to being dictated to, against the Polish people’s will, as regards the quota system, as regards forcible relocation of people to Poland,” Duda added.

In September 2015, when an earlier government was in power in Warsaw, EU leaders agreed that each country would accept a number of migrants over two years to alleviate the pressure on Greece and Italy, which have seen the arrival of tens of thousands of people from the Middle East. EU leaders agreed to relocate a total of about 160,000 migrants of more than two million people who arrived in Europe since 2015. But after coming to power in 2015, Poland’s conservative Law and Justice party, from which Duda hails, refused to honour that commitment. Poland now faces action from Brussels, which has threatened possible sanctions.

Speaking at a press conference after his meeting with Bulgarian President Rumen Radev, Duda said the future of the European Union was the main topic of talks, as Bulgaria prepares to take over the rotating presidency over the bloc at the beginning of next year. He added that Poland and Bulgaria had “the same position” on Europe’s migration crisis. Duda said that both countries want “preventative action”, which means protecting the European Union’s borders and sending aid to refugees and potential migrants “close to their countries”.

Scientists attending a recent meeting of the American Society for Microbiology reported they had uncovered a highly disturbing trend. They revealed that bacteria containing a gene known as mcr-1 – which confers resistance to the antibiotic colistin – had spread round the world at an alarming rate since its original discovery 18 months earlier. In one area of China, it was found that 25% of hospital patients now carried the gene. Colistin is known as the “antibiotic of last resort”. In many parts of the world doctors have turned to its use because patients were no longer responding to any other antimicrobial agent. Now resistance to its use is spreading across the globe. In the words of England’s chief medical officer, Sally Davies: “The world is facing an antibiotic apocalypse.”

Unless action is taken to halt the practices that have allowed antimicrobial resistance to spread and ways are found to develop new types of antibiotics, we could return to the days when routine operations, simple wounds or straightforward infections could pose real threats to life, she warns. That terrifying prospect will be the focus of a major international conference to be held in Berlin this week. Organised by the UK government, the Wellcome Trust, the UN and several other national governments, the meeting will be attended by scientists, health officers, pharmaceutical chiefs and politicians. Its task is to try to accelerate measures to halt the spread of drug resistance, which now threatens to remove many of the major weapons currently deployed by doctors in their war against disease.

The arithmetic is stark and disturbing, as the conference organisers make clear. At present about 700,000 people a year die from drug-resistant infections. However, this global figure is growing relentlessly and could reach 10 million a year by 2050. The danger, say scientists, is one of the greatest that humanity has faced in recent times. In a drug-resistant world, many aspects of modern medicine would simply become impossible. An example is provided by transplant surgery. During operations, patients’ immune systems have to be suppressed to stop them rejecting a new organ, leaving them prey to infections. So doctors use immunosuppressant cancer drugs. In future, however, these may no longer be effective.

Or take the example of more standard operations, such as abdominal surgery or the removal of a patient’s appendix. Without antibiotics to protect them during these procedures, people will die of peritonitis or other infections. The world will face the same risks as it did before Alexander Fleming discovered penicillin in 1928. [..] “In the Ganges during pilgrimage season, there are levels of antibiotics in the river that we try to achieve in the bloodstream of patients,” says Davies. “That is very, very disturbing.”

A beautiful Central American country known for its lush rainforests and stunning beaches, Costa Rica proves that achieving high levels of human wellbeing has very little to do with GDP and almost everything to do with something very different. Every few years the New Economics Foundation publishes the Happy Planet Index – a measure of progress that looks at life expectancy, wellbeing and equality rather than the narrow metric of GDP, and plots these measures against ecological impact. Costa Rica tops the list of countries every time. With a life expectancy of 79.1 years and levels of wellbeing in the top 7% of the world, Costa Rica matches many Scandinavian nations in these areas and neatly outperforms the United States. And it manages all of this with a GDP per capita of only $10,000, less than one fifth that of the US.

In this sense, Costa Rica is the most efficient economy on earth: it produces high standards of living with low GDP and minimal pressure on the environment. How do they do it? Professors Martínez-Franzoni and Sánchez-Ancochea argue that it’s all down to Costa Rica’s commitment to universalism: the principle that everyone – regardless of income – should have equal access to generous, high-quality social services as a basic right. A series of progressive governments started rolling out healthcare, education and social security in the 1940s and expanded these to the whole population from the 50s onward, after abolishing the military and freeing up more resources for social spending. Costa Rica wasn’t alone in this effort, of course.

Progressive governments elsewhere in Latin America made similar moves, but in nearly every case the US violently intervened to stop them for fear that “communist” ideas might scupper American interests in the region. Costa Rica escaped this fate by outwardly claiming to be anti-communist and – horribly – allowing US-backed forces to use the country as a base in the contra war against Nicaragua. The upshot is that Costa Rica is one of only a few countries in the global south that enjoys robust universalism. It’s not perfect, however. Relatively high levels of income inequality make the economy less efficient than it otherwise might be. But the country’s achievements are still impressive. On the back of universal social policy, Costa Rica surpassed the US in life expectancy in the late 80s, when its GDP per capita was a mere tenth of America’s.

Today, Costa Rica is a thorn in the side of orthodox economics. The conventional wisdom holds that high GDP is essential for longevity: “wealthier is healthier”, as former World Bank chief economist Larry Summers put it in a famous paper. But Costa Rica shows that we can achieve human progress without much GDP at all, and therefore without triggering ecological collapse. In fact, the part of Costa Rica where people live the longest, happiest lives – the Nicoya Peninsula – is also the poorest, in terms of GDP per capita. Researchers have concluded that Nicoyans do so well not in spite of their “poverty”, but because of it – because their communities, environment and relationships haven’t been ploughed over by industrial expansion.

U.S. President Donald Trump and Russian President Vladimir Putin are set to size each other up in person for the first time on Friday in what promises to be the most highly anticipated meeting on the sidelines of the G20 summit. Trump has said he wants to find ways to work with Putin, a goal made more difficult by sharp differences over Russia’s actions in Syria and Ukraine, and allegations Moscow meddled in the 2016 U.S. presidential election. That means every facial expression and physical gesture will be analyzed as much as any words the two leaders utter as the world tries to read how well Trump, a real estate magnate and former reality television star, gets along with Putin, a former spy. The fear is that the Republican president, a political novice whose team is still developing its Russia policy, will be less prepared than Putin, who has dealt with the past two U.S. presidents and scores of other world leaders.

“There’s nothing … the Kremlin would like to see more than a (U.S.) president who will settle for a grip and a grin and walk away saying that he had this fabulous meeting with the Kremlin autocrat,” Representative Adam Schiff, the top Democrat on the House of Representatives’ Intelligence Committee, said in an interview on MSNBC. As investigations at home continue into whether there was any collusion between Trump’s presidential campaign and Russia the U.S. president has come under pressure to take a hard line against the Kremlin. Moscow has denied any interference and Trump says his campaign did not collude with Russia. On Thursday, Trump won praise from at least one Republican hawk in the U.S. Congress after his speech in Warsaw in which he urged Russia to stop its “destabilizing activities” and end its support for Syria and Iran.

“This is a great start to an important week of American foreign policy,” said Republican Senator Lindsey Graham, who has often been critical of Trump on security issues. But earlier in the day, Trump declined to say definitively whether he believed U.S. intelligence officials who have said that Russia interfered in the 2016 election. “I think it was Russia but I think it was probably other people and/or countries, and I see nothing wrong with that statement. Nobody really knows. Nobody really knows for sure,” Trump said at a news conference, before slamming Democratic former President Barack Obama for not doing more to stop hacking.

It’s been relatively quiet in the last few weeks on the “the Russians did it, and Trump’s Putin’s best-buddy” propaganda-fest, but it appears the Deep State had three stories tonight – just hours ahead of Trump’s face-to-face with Putin – claim Russian hackers are targeting US nuclear facilities, the Russians are nonchalantly stepping up their spying, and that Russia alone interfered with the US election. With all eyes on the ‘handshake’ as Putin and Trump come face-to-face for the first time as world leaders, it seems the Deep State is desperately fearful of some rapprochement, crushing the need for NATO, and destroying the excuses for massive, unprecedented military-industrial complex spending.

And so, three stories (2 anonymously sourced and one with no facts behind it) in The New York Times (who recently retracted their “17 intelligence agencies” lie) and CNN (where do we start with these guys? let’s just go with full retraction of an anonymously sourced lie about Scaramucci and Kushner and the Russians) should stir up enough angst to ensure the meeting is at best awkward and at worst a lose-lose for Trump (at least in the eyes of the media). First off we have the ‘news’ that hackers have reportedly been breaking into computer networks of companies operating United States nuclear power stations, energy facilities and manufacturing plants, according to a new report by The New York Times.

“The origins of the hackers are not known. But the report indicated that an “advanced persistent threat” actor was responsible, which is the language security specialists often use to describe hackers backed by governments. The two people familiar with the investigation say that, while it is still in its early stages, the hackers’ techniques mimicked those of the organization known to cybersecurity specialists as “Energetic Bear,” the Russian hacking group that researchers have tied to attacks on the energy sector since at least 2012.” And Bloomberg piled on…”The chief suspect is Russia, according to three people familiar with the continuing effort to eject the hackers from the computer networks.” So that’s that 5 people – who know something – suspect it was the Russians that are hacking US nuclear facilities (but there’s no proof).

Next we move to CNN who claim a ‘current and former U.S. intelligence officials’ told them that Russian spies have been stepping up their intelligence gathering efforts in the U.S. since the election, feeling emboldened by the lack of significant U.S. response to Russian election meddling. “Russians have maintained an aggressive collection posture in the US, and their success in election meddling has not deterred them,” said a former senior intelligence official familiar with Trump administration efforts. “The concerning point with Russia is the volume of people that are coming to the US. They have a lot more intelligence officers in the US” compared to what they have in other countries, one of the former intelligence officials says.”

An anti-G20 rally in Hamburg has erupted into a violent confrontation between police and protesters. Dozens of officers have been injured by rioters as sporadic clashes on the streets of the German city continued into the night. “There have been offenses committed by smaller groups [but] we now have the situation under control… I was there myself, I’ve seen nothing like that before,” Hamburg police spokesman Timo Zill told German broadcaster ZDF. The ‘Welcome to Hell’ anti-globalist rally started off relatively peacefully as activists marched through the streets chanting slogans and holding banners. Clashes begun in the early evening after roughly 1,000 anti-globalism activists, wearing face masks, reportedly refused to reveal their identity to the authorities.

According to an official police statement, the trouble started when officers tried to separate aggressive black-bloc rioters from peaceful protesters at the St. Pauli Fish Market but were met with bottles, poles and iron bars, prompting them to use justifiable force. Police used pepper-spray on rioting protesters. Water cannons were also deployed by authorities and several people seemed to be injured as a number of people were seen on the ground or with bloody faces being led away by police. Footage from the scene also showed columns of green and orange smoke rising above the crowds. At least 76 police officers were injured in the riots, most, though, suffered light injuries, Bild reports. Five of them were admitted to hospital, a police officer told AFP. One policeman suffered an eye injury after fireworks exploded in front of his face. The number of injured demonstrators has not yet been released by authorities, DW German notes.

As a result of the violence, organizers declared the protest over Thursday evening, but pockets of activists remained on the streets throughout the night. Police confirmed persistent sporadic attacks on security forces in the districts of St. Pauli and Altona. Damage to property has also been reported throughout the city. According to RT’s correspondent on the scene, Peter Oliver, one of the protesters’ grievances was that they received no clear directives from the police as to where they were allowed to march and found themselves kettled by officers in riot gear once they set off. “They are macing everyone,” one witness at the scene told RT. “As far as I could tell, they were attacking the demonstration with no reason.” “I’m from Hamburg, [and] I’ve never seen anything like this. We’ve had fights about squatted houses and all that, [but] I’ve never seen anything like that. The aggression, as far as I could tell, the purposelessness… my face hurts, I’ve got mace and everything, this is unbelievable.”

Central banks are shutting down the music and turning on the lights after a near decade-long bond market party that resulted in ultra-low yields and low volatility. In the past two weeks, interest rates have been rising, at the prodding of the world’s central banks. Some bond strategists now see the possibility of a shift to a more fundamental-driven market, which could result in higher, more normal interest rate levels that will affect everything from home mortgages to commercial loans. That doesn’t mean the wake-up call will be a jolt, with rates snapping back violently or markets spinning out of control—though it could if rates begin to move too quickly. For now, market pros expect the rising interest rates of the past several weeks to be part of an orderly adjustment to a world in which central banks are preparing to end excessive easy policies.

The Federal Reserve is about to take the unprecedented step of reducing the balance sheet it built up to save the economy from the financial crisis. Since June 26, the U.S. 10- year yield has risen from 2.12% to Thursday’s high of 2.38%. The move has been global, after ECB President Mario Draghi last week pointed to a less risky outlook for the European economy, and Fed officials made consistently hawkish remarks. Some of those officials said they were even concerned that their policies created a too easy financial environment, meaning interest rates should be higher. The stock market caught wind of the rate move Thursday, and equities around the world responded negatively to rising yields. Bond strategists say if higher yields trigger a bigger sell off in stocks it could slow down the upward movement in interest rates, as investors will seek safety in bonds. Bond prices move opposite yields.

Friday’s June jobs report could be a moment of truth for the bond market. Strategists are looking to the wage gains in the report, expected at 0.3%. If they are as expected, the move higher in yields could continue. But a surprise to the upside could mean a much bigger move since it would signal a return of inflation. The Fed has said it is looking past the recent decline in inflation, but the market would become more convinced of the Fed’s rate-hiking intentions if it starts to rise.

Ray Dalio has declared the era of easy money is ending. The founder and chief investment officer of the world’s biggest hedge fund said Thursday in a commentary posted to LinkedIn that central bankers have “clearly and understandably” signaled the end of the nine-year era of monetary easing is coming. They are shifting strategy and are now focused on raising interest rates at a pace that keeps growth and inflation in balance, risking the next downturn if they get it wrong. “Recognizing that, our responsibility now is to keep dancing but closer to the exit and with a sharp eye on the tea leaves,” Dalio wrote.

In May, Dalio posted a commentary that said he was worried about the future, concerned that the magnitude of the next downturn could produce “much greater social and political conflict than currently exists.” On Thursday, he said the aggressive easing policies brought about “beautiful deleveragings,” and it was time to pause and thank the central bankers for pursuing them. “They had to fight hard to do it and have been more maligned than appreciated.” Dalio ends by saying he doesn’t see a big debt bubble about to burst, largely because of the balance sheet deleveraging that came about in the last few years. But, he said, “we do see an increasingly intensifying ‘Big Squeeze.'”

For some inexplicable reason, Ray Dalio still thinks the the world not only underwent a deleveraging, but that it was “beautiful.” Not only did McKinsey prove that to be completely false two years ago, but for good measure the IIF confirmed as much last week, when it revealed that global debt has hit a record $217 trillion, or 327% of GDP… while Citi’s Matt King showed that with no demand for credit in the private sector, central banks had no choice but to inject trillions to keep risk prices from collapsing.

And now, replacing one delusion with another, the Bridgewater head has penned an article in which he notes that as the “punch bowl” era is ending – an era which made Dalio’s hedge fund the biggest in the world, and richer beyond his wildest dreams – he would like to take the opportunity to “thanks the central bankers” who have ‘inexplicably’ been “more maligned than appreciated” even though their aggressive policies have, and here is delusion #1 again, “successfully brought about beautiful deleveragings.” “In my opinion, at this point of transition, we should savor this accomplishment and thank the policy makers who fought to bring about these policies. They had to fight hard to do it and have been more maligned than appreciated. Let’s thank them.” They fought hard to print $20 trillion in new money? Now that is truly news to us.

That said, we can see why Dalio would want to thank “them”: he wouldn’t be where he is, and his fund would certainly not exist today, if it weren’t for said central bankers who came to rescue the insolvent US financial system by sacrificing the middle class and burying generations under unrepayable debt. Still, some who may skip thanking the central bankers are hundreds of millions of elderly Americans and people worldwide also wouldn’t be forced to work one or more jobs well into their retirement years because monetary policies lowered the return on their savings to zero (or negative in Europe), as these same “underappreciated” central bankers created three consecutive bubbles, and the only reason the world is in its current abysmal socio-political and economic shape is due to the cumulative effect of their disastrous policies which meant creating ever greater asset and debt bubbles to mask the effects of the previous bubble, resulting in unprecedented wealth and income inequality, and which have culminated – most recently – with Brexit and Trump.

Australia has missed its chance to avoid a potential “economic apocalypse”, according to a former government guru who says that despite his warnings there are seven new signs we are too late to act. The former economics and policy adviser has identified seven ominous indicators that a possible global crash is approaching – including a surge in crypto-currencies such as Bitcoin – and the window for government action is now closed. John Adams, a former economics and policy adviser to Senator Arthur Sinodinos and management consultant to a big four accounting firm, told news.com.au in February he had identified seven signs of economic Armageddon. He had then urged the Reserve Bank to take pre-emptive action by raising interest rates to prevent Australia’s expanding household debt bubble from exploding and called on the government to rein in welfare payments and tax breaks such as negative gearing.

Adams says he has for years been publicly and privately urging his erstwhile colleagues in the Coalition to take action but that since nothing has been done, the window has now closed and Australia is completely at the mercy of international forces. “As early as 2012, I have been publicly and privately advocating that Australian policy makers take pre-emptive policy action to deal with the structural imbalances within the Australian economy, especially Australia’s household debt bubble which in proportional terms is larger than the household debt bubbles of the 1880s or 1920s, the periods which preceded the two depressions experienced in Australian history,” he told news.com.au this week. “Unfortunately, the window for taking pre-emptive action with an orderly unwinding of structural macroeconomic imbalances has now closed.”

Adams has now turned on his former party and says both its most recent prime ministers have led Australia into a potential “economic apocalypse” and Treasurer Scott Morrison is wrong that we are heading for a “soft landing”. “The policy approach by the Abbott and Turnbull Governments as well as the Reserve Bank of Australia and the Australian Prudential Regulation Authority, which has been to reduce systemic financial risk through new macro-prudential controls, has been wholly inadequate,” he says. “I do not share the Federal Treasurer’s assessment that the economy and the housing market are headed for a soft landing. Data released by the RBA this week shows that the structural imbalances in the economy are actually becoming worse with household debt as a proportion of disposable income hitting a new record of 190.4%.

“Because of the failure of Australia’s political elites and the policy establishment, the probability of a disorderly unwinding, particularly of Australia’s household and foreign debt bubbles, have dramatically increased over the past six months and will continue to increase as global economic and financial instability increases. “Millions of ordinary, financially unprepared, Australians are now at the mercy of the international markets and foreign policy makers. Australian history contains several examples of where similar pre conditions have resulted in an economic apocalypse, resulting in a significant proportion of the Australian people being left economically destitute.”

A month after Saudi Arabia, the United Arab Emirates, Bahrain and Egypt severed diplomatic, trade and transport ties with Qatar, accusing it of backing terrorism, it is suffering from isolation but is nowhere near an economic crisis. The alliance against it, meanwhile, may not have options to inflict further damage. As the world’s top liquefied natural gas exporter, Qatar is so rich – at $127,660, its gross domestic product per capita in purchasing power terms is the highest of any country, according to the IMF – it can deploy money to counter almost any type of sanction. In the past month it has arranged new shipping routes to offset the closure of its border with Saudi Arabia, deposited billions of dollars of state money in local banks to shore them up, and drawn the interest of some of the West’s biggest energy firms by announcing a plan to raise its LNG output 30%.

The success of these initiatives suggests Qatar could weather months or years of the current sanctions if it has the political will to do so – and that further sanctions being contemplated by the alliance may not prove decisive. On Wednesday, the alliance said Qatar, which denies any support for terrorism, had missed a deadline to comply with its demands. Further steps against Doha will be taken in line with international law “at the appropriate time”, Saudi Foreign Minister Adel al-Jubeir said. Saudi media reported this week that the new sanctions would include a pull-out of deposits and loans from Qatar by banks in alliance states, and a “secondary boycott” in which the alliance would refuse to do business with firms that traded with Qatar. Those steps would cause further pain for Qatar, but not to the point of destabilizing its financial system or breaking the peg of its riyal currency to the U.S. dollar, senior Qatari businessmen and foreign economists said.

The number of homes sold last month in the Greater Toronto Area plunged a whopping 37.3% compared to the same month a year ago, the city’s real estate board said Thursday, weeks after Ontario introduced measures aimed at cooling the housing market. The Toronto Real Estate Board said 7,974 homes changed hands in June while the number of new properties on the market climbed 15.9% year over year to 19,614. The average price for all properties was $793,915, up 6.3% from the same month last year. In April, the Ontario government implemented rules intended to dampen Toronto’s heated real estate market, where escalating prices have concerned policy-makers at the municipal, provincial and federal levels.

Ontario’s measures, retroactive to April 21, include a 15% tax on foreign buyers in the Greater Golden Horseshoe region, expanded rent controls and legislation allowing Toronto and other cities to tax vacant homes. “We are in a period of flux that often follows major government policy announcements pointed at the housing market,” TREB president Tim Syrianos said in a statement. “On one hand, consumer survey results tell us many households are very interested in purchasing a home in the near future, but some of these would-be buyers seem to be temporarily on the sidelines waiting to see the real impact of the Ontario Fair Housing Plan. On the other hand, we have existing homeowners who are listing their home because they feel price growth may have peaked. The end result has been a better supplied market and a moderating annual pace of price growth.”

Back in the 1950s when GM had 50% of the auto market they always said that, “As General Motors goes, so goes the nation.” That was obviously a tribute to GM’s economic muscle and its role as the driver of growth and rising living standards in post-war America’s booming economy. Those days are long gone for both GM and the nation. GM’s drastically reduced 20% market share of U.S. light vehicle sales in June was still an economic harbinger, albeit of a different sort. GM offered a record $4,361 of cash incentives during June. That was up 7% from last year and represented 12% of its average selling price of $35,650 per vehicle, also a record. But what it had to show for this muscular marketing effort was a 5% decline in year-over-year sales and soaring inventories. The latter was up 46% from last June.

My purpose is not to lament GM’s ragged estate, but to note that it — along with the entire auto industry — has become a ward of the Fed’s debt-fueled false prosperity. The June auto sales reports make that absolutely clear. In a word, consumers spent the month “renting” new rides on more favorable terms than ever before. But that couldn’t stop the slide of vehicle “sales” from its 2016 peak. In fact, June represented the 6th straight month of year-over-year decline. And the fall-off was nearly universal — with FiatChrysler down 7.4%, Ford and GM off about 5% and Hyundai down by 19.3%. The evident rollover of U.S. auto sales is a very big deal because the exuberant auto rebound from the Great Recession lows during the last six years has been a major contributor to the weak recovery of overall GDP.

In fact, overall industrial production is actually no higher today than it was in the fall of 2007. That means there has been zero growth in the aggregate industrial economy for a full decade. Real production in most sectors of the U.S. economy has actually shrunk considerably, but has been partially offset by a 15% gain in auto production from the prior peak, and a 130% gain from the early 2010 bottom. By comparison, the index for consumer goods excluding autos is still 7% below its late 2007 level. So if the so-called “recovery” loses its automotive turbo-charger, where will the growth come from?

On August 14, 1997, shortly after the Thai baht collapsed on July 2nd, Indonesia floated the rupiah. This prompted Stanley Fischer, then the Deputy Managing Director of the IMF and presently Vice Chairman of the U.S. Federal Reserve, to proclaim that “the management of the IMF welcomes the timely decision of the Indonesian authorities. The floating of the rupiah, in combination with Indonesia’s strong fundamentals, supported by prudent fiscal and monetary policies, will allow its economy to continue its impressive economic performance of the last several years.” Contrary to the IMF’s expectations, the rupiah did not float on a sea of tranquility. It plunged from a value of 2,700 rupiahs per U.S. dollar to lows of nearly 16,000 rupiahs per U.S. dollar in 1998. Indonesia was caught up in the maelstrom of the Asian Financial Crisis.

By late January 1998, President Suharto realized that the IMF medicine was not working and sought a second opinion. In February, I was invited to offer that opinion and was appointed as Suharto’s Special Counselor. Although I did not have any opinions on the Suharto government, I did have definite ones on the matter at hand. After nightly discussions at the President’s private residence, I proposed an antidote: an orthodox currency board in which the rupiah would be fully convertible into and backed by the U.S. dollar at a fixed exchange rate. On the day that news hit the street, the rupiah soared by 28% against the U.S. dollar on both the spot and one year forward markets. These developments infuriated the U.S. government and the IMF. Ruthless attacks on the currency board idea and the Special Counselor ensued. Suharto was told in no uncertain terms – by both the President of the United States, Bill Clinton, and the Managing Director of the IMF, Michel Camdessus – that he would have to drop the currency board idea or forego $43 billion in foreign assistance.

Economists jumped on the bandwagon, trotting out every imaginable half-truth and non-truth against the currency board idea. In my opinion, those oft-repeated canards were outweighed by the full support for an Indonesian currency board by four Nobel Laureates in Economics: Gary Becker, Milton Friedman, Merton Miller, and Robert Mundell. Also, Sir Alan Walters, Prime Minister Thatcher’s economic guru, a key figure behind the establishment of Hong Kong’s currency board in 1983, and my colleague and close collaborator, endorsed the idea of a currency board for Indonesia. Why all the fuss over a currency board for Indonesia? Merton Miller understood the great game immediately. As he said when Mrs. Hanke and I were in residence at the Shangri-La Hotel in Jakarta, the Clinton administration’s objection to the currency board was “not that it wouldn’t work, but that it would, and if it worked, they would be stuck with Suharto.”

Much the same argument was articulated by Australia’s former Prime Minister Paul Keating: “The United States Treasury quite deliberately used the economic collapse as a means of bringing about the ouster of Suharto.” Former U.S. Secretary of State Lawrence Eagleburger weighed in with a similar diagnosis: “We were fairly clever in that we supported the IMF as it overthrew (Suharto). Whether that was a wise way to proceed is another question. I’m not saying Mr. Suharto should have stayed, but I kind of wish he had left on terms other than because the IMF pushed him out.” Even Michel Camdessus could not find fault with these assessments. On the occasion of his retirement, he proudly proclaimed: “We created the conditions that obliged President Suharto to leave his job.”

Hmm. Treating this is an American phenomenon is not useful. It’s global. And that has a lot to do with deteriorating economic conditions. Centralization is only accepted as long as it has tangible benefits for people.

History informs us that once something is obsolete, it can disappear far faster than anyone expected. While we generally think of obsoleted technologies vanishing, social and political systems can become obsolete as well. Should a poor soul who entered a deep coma a year ago awaken today, we must forgive his/her astonishment at the political wreckage left by the 2016 election. The Democratic Party, a mere year ago an absurdly over-funded machine confident in an easy victory in the presidential race, is now a complete shambles: its leadership in free-fall, its Fat-Cat donors disgusted, and its demented intoxication with pinning collaboration with Russia on the Trump camp eroding whatever feeble legacy legitimacy it still holds. What the party stands for is a mystery, as its Elites are clearly beholden to insiders, special interests and Corporate donors while glorifying the worst excesses of globalism and the National Security State’s endless war on civil liberties.

The newly awakened citizen would also marvel at the chaotic war zone of the Republican Party, in which the Insider Warlords are battling insurgent Outsiders, while the same Elites that fund the Democratic machine are wondering what they’re buying with their millions of dollars in contributions, for it’s unclear what the Republican Party stands for: it’s for Small Government, except when it’s for Bigger Government, which is 95% of the time; it’s for more law enforcement and the militarization of local police, and more intrusion into the lives of the citizenry; it’s for stricter standards for welfare, except for Corporate Welfare; it’s for tax reform, except the thousands of pages of give-aways, loopholes and tax breaks for the wealthy and corporations all remain untouched, and so on: a smelly tangle of special interests masked by a few sprays of PR air freshener to the millions left behind by the globalization that has so enriched Corporate America and the class of financier-owners, bankers, insiders and technocrats–the same group that funds and controls both political parties.

Political parties arose to consolidate centralized control of the central state. We have now reached the perfection of this teleology: the political elites and the financial elites are now one class. In our pay-to-play “democracy,” only the votes of wealth and institutional power count. As I have often noted here, the returns on centralization are diminishing to less than zero. The initial returns on centralizing capital, production and social-political power were robust, but now the centralized cartel-state is eating its own tail, masking its financial bankruptcy by borrowing from the future, and cloaking its political bankruptcy behind the crumbling facades of the legacy parties. Now that technology has enabled decentralized currency, markets and governance, the centralized political parties are obsolete.

Talks to reunify the divided island of Cyprus collapsed in the early hours of Friday, U.N. Secretary General Antonio Guterres said after a stormy final session. “I’m very sorry to tell you that despite the very strong commitment and engagement of all the delegations and different parties … the conference on Cyprus was closed without an agreement being reached,” he told a news conference. The collapse marked a dramatic culmination of more than two years of a process thought to be the most promising since the island was split more than 40 years ago. Guterres had flown in on Thursday to press Greek Cypriot President Nicos Anastasiades and Turkish Cypriot leader Mustafa Akinci to seal a deal reuniting the east Mediterranean island, while U.S. Vice President Mike Pence had phoned to urge them to “seize this historic opportunity”.

Diplomatic efforts to reunite Cyprus have failed since the island was riven in a 1974 Turkish army invasion triggered by a coup by Greek Cypriots seeking union with Greece. The week of talks in the Swiss Alps, hailed by the United Nations as “the best chance” for a deal, ground to a halt as the two sides failed to overcome final obstacles. Diplomats said Turkey had appeared to be offering little to Greek Cypriots wanting a full withdrawal of Turkish troops from the island, although the Greek Cypriots had indicated readiness to make concessions on Turkish Cypriot demands for a rotating presidency, the other key issue. Guterres finally called a halt at 2 a.m. after a session marred by yelling and drama, a source close to the negotiations said. “Unfortunately… an agreement was not possible, and the conference was closed without the possibility to bring a solution to this dramatic and long-lasting problem,” Guterres said.

U.S. stocks sank Friday, with the S&P 500 and the Dow Jones Industrial Average closing down for the week, as Federal Reserve’s decision to leave interest rates unchanged fueled fears about global economic growth. The central bank cited concerns about the global economy and a lack of inflation growth in its Thursday decision to leave interest rates unchanged. “Many are confused by the outcome of the recent Fed meeting,” said Kent Engelke at Capitol Securities. “Markets hate confusion and lack of clarity.” The S&P 500 skidded 32.16 points, or 1.6%, to close at 1,958.08 for a weekly loss of 0.2%. All S&P 500 sectors finished lower, led by energy shares. The Dow Jones dropped 289.95 points, or 1.7%, to close at 16,384.79 with all 30 components in the red. The blue-chip index edged down 0.3% for the week.

The Nasdaq shed 66.72 points, or 1.4% to 4,827.23. The tech-heavy index is the only one of the three major stock barometers to finish out the week higher with gains of 0.1%. Trading volume was elevated, with 5.74 billion shares changing hands on the New York Stock Exchange, due to “quadruple witching,” which means the expiration of various stock-index futures, stock-index options, stock options and single-stock futures. Friday is the second highest volume day of the year. “By not raising the rates, the Fed is now fanning global growth fears,” said Steven Wieting, global chief investment strategist, at Citi Private Bank. “The key for future market action depends largely on whether or not the Fed had any good cause to worry about international developments,” Wieting said.

The Federal Reserve is scared—of lots of things, some obvious, some not so much. Thursday’s Fed decision to delay yet again the long-awaited liftoff from zero rates gave rise to still more speculation about why the U.S. central bank seems so perpetually reticent to normalize monetary policy. There are all the usual suspects, such as low inflation, weak wage gains despite strong job growth and China plus the rest of the emerging global economy. One reason that hasn’t gotten much attention is the need for the Fed to keep rates low both for government debt and the corporations that now have $12.5 trillion in debt. Among the prime beneficiaries of zero interest rates have been low-rated companies that have been able to borrow money at rates often in the 5% to 6% range.

A move to higher rates, even a small one, could have outsized impacts on those bad balance sheet companies.That puts the Fed in a bit of a Faustian bargain with issuers and holders that has become hard to break. Not only has high-yield issuance exploded in the days of the central bank’s ultra-easy accommodation, but the bottom of the ladder has gotten more crowded as well. About a quarter of all debt issued now in the junk universe is held by companies rated B3 or lower, according to Moody’s. Credit standards have continued to loosen as well, with the ratings agency reporting that its covenant quality index—essentially a read on how strict the conditions are on corporate borrowers—is at record lows.

“Businesses as a whole in the U.S. are better placed now to absorb any shocks that might hit them,” Bodhi Ganguli, senior economist at Dun & Bradstreet, said in a phone interview. “However, there are pockets of greater weakness like these zombie companies. These pockets are likely to see some more turbulence than overall conditions. Some companies definitely will go out of business.” It isn’t just the zombies, though, that should worry about higher rates. Corporate America overall has been piling on the debt, which grew 8.3 percent in the second quarter, according to figures the Fed released Friday.

Has the U.S. Federal Reserve become the world’s economic guardian? The central bank’s decision not to lift interest rates this week because of weakening global growth and a recent surge in market volatility has sparked talk of a “third mandate.” Analysts say that explicit references by the Fed following its meeting on Thursday to the China slowdown and its impact mark a significant departure for the central bank, which is mandated to ensure job creation and price stability in the U.S. economy. “The Federal Reserve’s third mandate appears to be global financial stability,” Mark Haefele at UBS said.

“The U.S. central bank has backed away from its first rate rise in over nine years, saying that international economic and financial weakness could dampen activity in the U.S.,” he said. Economists had been split over whether the Fed would deliver a long-anticipated rate increase this week and market expectations for when rates will rise have been pushed back further following a dovish Fed statement. In fact, one reason for the scaling back of rate-hike speculation in recent weeks has been growing concern about weakness in China – the world’s second-largest economy after the U.S. – and a sharp sell-off in emerging and developed markets in August. According to Deutsche Bank, global stock markets lost $5 trillion of their value in six days in August.

“The argument that global market developments are playing second fiddle to U.S. economic developments is a tenuous one, especially if the epicentre of global economic weakness is China – which is very important to U.S. economy,” Nicholas Spiro of Spiro Sovereign Strategy told CNBC. “It’s clear that what’s happening in China, especially in recent months, is having a massive deflationary impact so it’s about time we heard the Fed was concerned about China,” he said. Beijing is targeting a full-year growth rate of around 7%, which would be the slowest rate in almost 25 years. And there are concerns that the target will be missed amid weak economic data and a rout in Chinese stock markets that threaten to undermine confidence further.

Despite all the ballyhooing about moving to a more market-based exchange rate, the PBoC actually did the opposite on August 11. As BNP’s Mole Hau put it “whereas the daily fix was previously used to fix the spot rate, the PBoC now seemingly fixes the spot rate to determine the daily fix, [thus] the role of the market in determining the exchange rate has, if anything, been reduced in the short term.” Obviously, a reduced role for the market, means a greater role for the PBoC, and that of course means intervention via FX reserve drawdowns (i.e. the liquidation of US paper). Of course no one believed that China’s deval was “one and done” which meant that the pressure on the yuan increased and before you knew it, the PBoC was intervening all over the place.

By mid-September, PBoC intervention had cost some $150 billion between onshore spot interventions and offshore spot and forward meddling. The problem – as everyone began to pick up on some 10 months after we announced the death of the petrodollar – is that when EMs start liquidating their reserves, it works at cross purposes with DM QE. That is, it offsets it. Once this became suddenly apparent to everyone at the end of last month, market participants simultaneously realized – to their collective horror – that the long-running slump in commodity prices and attendant pressure on commodity currencies as well as the defense of various dollar pegs meant that, as Deutsche Bank put it, the great EM reserve accumulation had actually begun to reverse itself months ago. China’s entry into the global currency wars merely kicked it into overdrive.

What the above implies is that the Fed, were it to have hiked on Thursday, would have been tightening into a market where the liquidation of USD assets by foreign central banks was already sapping global liquidity and exerting a tightening effect of its own. In other words, the FOMC would have been tightening into a tightening. But that’s not all. When China devalued the yuan it also confirmed what the EM world had long suspected but what EM currencies, equities, and bonds had only partially priced in. Namely that China’s economy was crashing. For quite a while, the fact that Beijing hadn’t devalued even as the yuan’s dollar peg caused the RMB’s REER to appreciate by 14% in just 12 months, was viewed by some as a sign that things in China might not be all that bad.

After all, if a country with an export-driven economy can withstand a double-digit currency appreciation without a competitive devaluation even as the global currency wars are being fought all around it, then the situation can’t be too dire. Put simply, the devaluation on August 11 shattered that theory and reports that China is “secretly” targeting a much larger devaluation in order to boost export growth haven’t helped. For emerging markets, this realization was devastating. Depressed demand from China had already led to a tremendous amount of pain across emerging economies and the message the devaluation sent was that China’s economy wasn’t set to rebound any time soon, meaning global demand and trade will likely remain subdued, as will commodity prices.

A lack of activity by the U.S. Federal Reserve on Thursday may not have been a surprise, but it’s left no doubt in analysts’ minds that other central banks will now look to ease policy further, a move that could send more shock waves across global currency markets. Valentin Marinov at Credit Agricole told CNBC Friday that he expects global “currency wars” to intensify from here. He predicts the Bank of Japan, the ECB and the People’s Bank of China (PBOC) has now effectively been pushed into unveiling more stimulus. “The Fed inaction could spur other central banks into action,” he said. “It is currency wars.” The dollar skidded to a three-week low against a basket of major currencies after Thursday’s decision.

This comes after the greenback had been appreciating significantly since the middle of last year in anticipation of higher interest rates in the U.S. A higher interest rate can mean a higher yield on assets and investors in the U.S. have been busy bringing their dollars home, and thus out of high-yielding foreign investments. A weaker dollar in the short term could now leave other global economies frustrated and dent export-focused companies that favor a weak domestic currency. Manipulating reserve levels can be one way that a country’s central bank can intervene against currency fluctuations. Other measures include altering benchmark interest rates and quantitative easing. Central banks often stress that exchange rates are not a primary policy goal and can be seen more as a positive by-product of monetary easing.

There have been discussions in the last few years that countries are purposefully debasing their own currencies – a concern that was termed “currency wars” by Brazil’s Finance Minister Guido Mantega in September 2010. Credit Agricole’s Marinov highlighted that the ECB could be the next to act by ramping up its current bond-buying program, thus weakening the single currency – even though its only mandate is to manage inflation. Analysts at BNP Paribas also stated Friday that the Fed decision had increased their conviction that the ECB would increase its quantitative easing program. Marc Ostwald, strategist at ADM ISI, said in a note Friday that the ECB and the BoJ who will now face “even bigger challenges, given that the Fed is clearly not in any hurry to live up to its part of the ‘policy divergence’ grand bargain.”

The US Federal Reserve would have been mad to raise interest rates in the middle of a panic over China and an emerging market storm, and doubly so to do it against express warnings from the IMF and the World Bank. The Fed is the world’s superpower central bank. Having flooded the international system with cheap dollar liquidity during the era of quantitative easing, it cannot lightly walk away from its global responsibilities – both as a duty to all those countries that were destabilized by dollar credit, and in its own enlightened self-interest. Dollar debt outside the jurisdiction of the US has reached $9.6 trillion, on the latest data from the Bank for International Settlements. Dollar loans to emerging markets have doubled since the Lehman crisis to $3 trillion.

The world has never been so leveraged, and therefore so acutely sensitive to any shift in monetary signals. Nor has the global financial system ever been so tightly inter-linked, and therefore so sensitive to the Fed. The BIS says total debt in the rich countries has jumped by 36%age points to 265pc of GDP since the peak of the last cycle, and by 50 points to 167pc in developing Asia, Latin America, the Middle East, Eastern Europe, and Africa. It is wishful thinking to suppose that the world can brush off a Fed rate rise on the grounds that most of the debt is in local currencies. BIS research shows that they will face a rate shock regardless. On average, a 100 point move in US rates leads to a 43 point move in local currency borrowing costs in EM and open developed economies.

Given that the Fed was forced to reverse course dramatically in 1998 when the East Asia crisis blew up – for fear it would take down the US financial system – it can hardly go ahead nonchalantly with rate rises into the teeth of the storm today when emerging markets are an order of magnitude larger and account for 50pc of global GDP. Even if you reject these arguments, Goldman Sachs says the strong dollar and the market rout in August already amount to 75 basis points of monetary tightening for the US economy itself. Headline CPI inflation in the US is just 0.2pc. Prices fell in August. East Asian is transmitting a deflationary shock to the West, and it is not yet clear whether the trade depression in the Far East is safely over.

The argument that zero rates are unhealthy and impure is to let Calvinist psychology intrude on the hard science of monetary management. The chorus of demands – and just from ‘internet-Austrians’ – that rates should be raised in order to build up reserve ammunition in case they need to be cut later, is a line of reasoning that borders on insanity. If acted on, it would risk tipping us all into the very deflationary trap that we are supposed to be protecting ourselves against, the Irving Fisher moment when a sailing boat rolls beyond the point of natural recovery, and capsizes altogether. So hats off to Janet Yellen for refusing to listen to such dangerous counsel. However, the Fed is damned if it does, and damned if it does not, for by recoiling yet again it may well be storing up a different kind of crisis next year.

The world’s leading central banks are facing the risk that their massive efforts to revive economic growth could be dragged down again, with some officials arguing for bold new ideas to counter the threat of slow growth for years to come. A day after the U.S. Federal Reserve kept interest rates at zero, citing risks in the global economy, the Bank of England’s chief economist said central banks had to accept that interest rates might get stuck at rock bottom. In Japan, where interest rates have been at zero for more than 20 years, policymakers are already tossing around ideas for overhauling the Bank of Japan’s huge monetary stimulus program as they worry that it will be unsustainable in the future, according to sources familiar with its thinking.

Separately a top ECB official said the ECB’s bond-buying program might need to be rethought if low inflation becomes entrenched. But he added monetary policy would not restore economic growth over the long term. More than eight years after the onset of the financial crisis, the economies of the United States and Britain are growing at a healthier pace, in contrast to those of Japan and in many euro zone countries. But the risk of a sharp slowdown in China and other emerging economies has prevented the Fed from starting to raise interest rates and is being watched closely by the Bank of England.

Investors mostly think that the Fed’s delay will be short-lived and that it could begin raising rates before the end of the year, followed a few months later by Britain’s central bank. But the BoE’s chief economist, Andy Haldane, who has long been gloomy about the chances of a sustainable recovery, said the world might in fact be sinking into a new phase of the financial crisis – this time caused by emerging markets.

Even after China’s slowing economy dragged crude to a six-year low, oil’s second-biggest consumer remains the main safeguard against a further price meltdown. While China’s surprise currency devaluation helped trigger Brent crude’s slump to about $42 a barrel last month, the nation’s stockpiling of oil can staunch further losses. In the first seven months of the year, China purchased about half a million barrels of crude in excess of its daily needs, the most for the period since 2012, according to data compiled by Bloomberg. As the country gathers bargain barrels for its strategic petroleum reserve, the demand is cushioning an oversupplied market from a further crash, according to Columbia University’s Center on Global Energy Policy.

“It throws a lifeline to the market” that safeguards against the risk of crude touching $20 a barrel, Jeff Currie at Goldman Sachs said. “That lifeline lasts through late 2016.” Other countries have emergency oil-supply buffers, and while the U.S. Strategic Petroleum Reserve has been stable at about 700 million barrels for years, China is expanding its stockpiles rapidly. The Asian nation has accumulated about 200 million barrels of crude in its reserve so far and aims to have 500 million by the end of the decade, according to the International Energy Agency. It’s currently filling a 19 million-barrel facility at Huangdao and will add oil at six sites with a combined capacity of about 132 million barrels over the next 18 months, the Paris-based adviser on energy policy estimates.

“The fact that China is stockpiling crude for public strategic storage certainly offsets the weaker sentiment on China’s oil-product demand,” said Harry Tchilinguirian, head of commodity markets strategy at BNP Paribas SA in London. China’s demand growth is set to slow to an annual rate of 2.3% by the fourth quarter compared with 5.6% in the second quarter, a reflection of “weak car sales data, declines in industrial activity, plummeting property prices and fragile electricity output,” the IEA said in a report on Sept. 11.

Investors can forget the “death cross,” “bearish divergences” and “symmetrical triangles,” and what the Federal Reserve says it will do about interest rates, and just focus on Occam’s razor: The S&P 500 abandoned its long-term uptrend in late August, meaning it is now in a downtrend. Occam’s razor is the philosophical principle that suggests, all things being equal, the simplest explanation tends to be the right one. One of the most elementary trading maxims on Wall Street is “the trend is your friend.” That’s basically what all the short-term technical patterns, economic data and earnings reports are used for, to determine which direction the longer-term trend is heading, and whether it’s about to change.

Once that trend is determined, a tenet of the century-old Dow Theory of market analysis says it is assumed to remain in effect, until it gives definite signals that it has reversed, according to the Market Technicians Associations knowledge base. In other words, the trend is your friend, until it isn’t. After cutting through all the noise, a trendline is probably the best chart pattern to determine the trend, as it is also the simplest. And the simplest way to tell if a trend has reversed, is if the trendline breaks. The S&P 500 had been riding a strong weekly uptrend, defined by the trendline connecting the bottom of the last correction in October 2011 with the bottom of the November 2012 pullback and the October 2014 low. The S&P 500 fell below that line in late August, meaning the uptrend flipped to a downtrend. Based on the Occam’s razor principle, the uptrend was the friend of investors for four years, but now it isn’t.

The overleveraging of the U.S. federal, state, and local governments, some corporations, and consumers is well known. This has long been the case, and most people are bored by the topic. If debt is a problem, it has been manageable for so long that it no longer seems like a problem. U.S. government debt has become an abstraction; it has no more meaning to the average investor than the prospect of a comet smacking into the earth in the next hundred millennia. Many financial commentators believe that debt doesn’t matter. We still hear ridiculous sound bites, like “We owe it to ourselves,” that trivialize the topic. Actually, some people owe it to other people. There will be big transfers of wealth depending on what happens.

More exactly, since Americans don’t save anymore, that dishonest phrase about how we owe it to ourselves isn’t even true in a manner of speaking; we owe most of it to the Chinese and Japanese. Another chestnut is “We’ll grow out of it.” That’s impossible unless real growth is greater than the interest on the debt, which is questionable. And at this point, government deficits are likely to balloon, not contract. Even with artificially low interest rates. One way of putting an annual deficit of, say, $700 billion into perspective is to compare it to the value of all publicly traded stocks in the U.S., which are worth roughly $20 trillion. The current U.S. government debt of $18 trillion is rapidly approaching the stock value of all public corporations – and that’s true even with stocks at bubble-like highs.

If the annual deficit continues at the $700 billion rate – in fact it is likely to accelerate – the government will borrow the equivalent of the entire equity capital base of the country, which has taken more than 200 years to accumulate, in only 29 years. You should keep all this in the context of the nature of debt; it can be insidious. The only way a society (or an individual) can grow in wealth is by producing more than it consumes; the difference is called “saving.” It creates capital, making possible future investments or future consumption. Conversely, “borrowing” involves consuming more than is produced; it’s the process of living out of capital or mortgaging future production.

Saving increases one’s future standard of living; debt reduces it. If you were to borrow a million dollars today, you could artificially enhance your standard of living for the next decade. But, when you have to repay that money, you will sustain a very real decline in your standard of living. Even worse, since the interest clock continues ticking, the decline will be greater than the earlier gain. If you don’t repay your debt, your creditor (and possibly his creditors, and theirs in turn) will suffer a similar drop. Until that moment comes, debt can look like the key to prosperity, even though it’s more commonly the forerunner of disaster.

The Treasury Department said Friday it would delay enforcement of one key part of a 2010 law that is aimed at curbing offshore tax evasion, in a regulatory victory for banks. The law, the Foreign Account Tax Compliance Act, or FATCA, requires foreign banks to start handing over information about U.S.-owned accounts to the Internal Revenue Service. It also would force banks and other financial institutions around the world to withhold a share of many types of payments to other banks that aren’t complying with the law. In effect, the withholding amounts to a kind of U.S. tax penalty on noncompliant financial institutions. The latest move by Treasury will push back the start of withholding for many types of transactions—such as stock trades—from 2017 until 2019.

Withholding for some other types of payments has already begun. The change will give banks more time to come into compliance with FATCA, and governments and the financial industry more time to work out some of the difficult details involved in withholding on more-complex financial transactions. The withholding provision is “the really big stick” in FATCA, said Michael Plowgian, a former Treasury official who is now at KPMG LLP. “The problem with it is that it’s really complicated…So Treasury and IRS have essentially punted” and created more time to solve some of the sticky technical issues, he added.

The Securities Industry and Financial Markets Association, a Wall Street trade group, applauded the move. Given some of the complexities involved, “the 2017 deadline didn’t seem to make sense,” added Payson Peabody, tax counsel for SIFMA. “They are giving themselves more time and giving everyone else a bit more time to comment” on some of the hard questions. Despite the delay in some withholding, experts say FATCA implementation continues to move ahead.

Moody’s Investors Service is downgrading the credit rating of France, saying the French economy will grow slowly for the rest of this decade while the country’s debt remains high. The firm lowered its rating to “Aa2” from “Aa1.” That means France has Moody’s third-highest possible rating. Moody’s said Friday the outlook for economic growth in France is weak, and it does not expect that to change soon. It says the high national debt burden probably will not be reduced in the next few years because of low growth and institutional and political constraints. Overall Moody’s says France’s creditworthiness is “extremely high” because of its large, wealthy, well-diversified economy, high per-capita income, good demographic trends, strong investor base and low financing costs. The outlook was raised to “stable” from “negative.”

The Bank of England may need to push its interest rates into negative territory to fight off the next recession, its chief economist has said. Andy Haldane, one of the Bank’s nine interest rate setters, made the case for the “radical” option of supporting the economy with negative interest rates, and even suggested that cash could have to be abolished. He said that the “the balance of risks to UK growth, and to UK inflation at the two-year horizon, is skewed squarely and significantly to the downside”. As a result, “there could be a need to loosen rather than tighten the monetary reins as a next step to support UK growth and return inflation to target”. Speaking at the Portadown Chamber of Commerce, Mr Haldane’s support for a possible cut in rates came as the Bank as a whole has signalled that the next move in rates would be up.

But recent volatility in financial markets, prompted by China, and a decision by the US Federal Reserve to delay rate hikes, have pushed back expectations of the Bank’s first rate rise to November 2016. Traditionally policymakers have resisted cutting rates below zero because when the returns on savings fall into negative territory, it encourages people to take their savings out of the bank and hoard them in cash. This could slow, rather than boost, the economy. It would be possible to get around the problem of hoarding by abolishing cash, Mr Haldane said, adding: “What I think is now reasonably clear is that the payment technology embodied in [digital currency] Bitcoin has real potential.” His remarks came as he made the case for raising the UK’s inflation target to 4pc from the current level of 2pc.

Mr Haldane said that a trend towards low interest rates across the globe has made it increasingly difficult to fight off recessions. In the past, central banks have helped stimulate economies by slashing interest rates. But with rates at rock bottom in many parts of the world, many have found their ammunition depleted. “Among the large advanced economies, official interest rates are effectively at zero,” Mr Haldane said. In the UK, the Bank’s interest rate has been stuck at 0.5pc for more than six years. One way to supply the Bank with more firepower would “be to revise upwards inflation targets”. The UK’s inflation target is currently 2pc, but this dates from an era when interest rates were closer to 6pc than 0.5pc. It might be necessary to double that target to 4pc, Mr Haldane argued.

Bank research has determined that slowing growth, ageing populations, weaker investment, rising inequality and a savings glut in emerging markets have all contributed to a generational decline in interest rates. Mr Haldane said: “These factors are not will-of-the-wisp. None is likely to reverse quickly. “That would mean there is materially less monetary policy room for manoeuvre than was the case a generation ago. Headroom of two%age points would potentially be insufficient.” However a hike in the inflation target to 4pc would provide extra “wiggle room”.

David Cameron is traversing Europe, apparently without much idea of what he wants to achieve in his much-feted renegotiation ahead of a referendum in 2016 or 2017. If the prime minister thinks he can weaken workers’ rights and expect goodwill towards Europe to keep us in the EU, he is making a great mistake. Mr Cameron’s support for a bill that would weaken the trade unions, and the cutting of tax credits this week, show that employment rights are under attack. One can imagine that the many rights we derive from European legislation, which underpins paid holidays, working time protection and improved maternity and paternity leave, are under threat too. There is a widely shared feeling that Europe is something of an exclusive club, rather than a democratic forum for social progress.

Tearing up our rights at work would strengthen that view. Labour will oppose any attempt by the Conservative government to undermine rights at work — whether in domestic or European legislation. Our shadow cabinet is also clear that the answer to any damaging changes that Mr Cameron brings back from his renegotiation is not to leave the EU but to pledge to reverse those changes with a Labour government elected in 2020. Workplace protections are vital to protect both migrant workers from being exploited and British workers from being undercut. Stronger employment rights also help good employers, who would otherwise face unfair competition from less scrupulous businesses. We will be in Europe to negotiate better protection for people and businesses, not to negotiate them away.

Too much of the referendum debate has been monopolised by xenophobes and the interests of corporate boardrooms. Left out of this debate are millions of ordinary British people who want a proper debate about our relationship with the EU. We cannot continue down this road of free-market deregulation, which seeks to privatise public services and dilute Europe’s social gains. Draft railway regulations that are now before the European Parliament could enforce the fragmented, privatised model that has so failed railways in the UK. The proposed Transatlantic Trade and Investment Partnership that is being negotiated behind closed doors between the EU and the US, against which I have campaigned, is another example of this damaging approach.

There is no future for Europe if we engage in a race to the bottom. We need to invest in our future and harness the skills of Europe’s people. The treatment of Greece has appalled many who consider themselves pro-European internationalists. The Greek debt is simply not repayable, the terms are unsustainable and the insistence that the unpayable be paid extends the humanitarian crisis in Greece and the risks to all of Europe. The current orthodoxy has failed. We need a new economic settlement.

An unannounced train carrying over 1,000 asylum seekers, accompanied by around 40 Croatian police officers, has been intercepted by Hungarian authorities, who accused Zagreb of breaking international laws and intentionally participating in “human smuggling.” The train carrying up to 1,000 refugees was accompanied by some 40 Croatian police officers, who were reportedly detained and then sent back. Croatian police however refuted initial reports that officers accompanying the train were detained or disarmed, explaining that 36 officers “returned” to Croatia in the evening. “There was no disarming or arrests. It is not true,” Croatian police spokeswoman Jelena Bikic told Reuters, claiming that there was “an agreement about the escort between the police officers from the two sides in advance.”

Hungarian authorities said that the incident happened due to Croatia’s failure to coordinate train’s border crossing. According to the head of the Hungarian disaster unit, Gyorgy Bakondi, the Croatian train arrived at Magyarboly without any prior notice, bringing the number of unannounced arrivals to over 4,000 on Friday alone. Croatia’s FM Vesna Pusic claimed that the two countries had agreed “to provide a corridor” for refugees, Sky News reported. However Hungarian spokesman Zoltan Kovacs rejected the claim as a “lie.” “The Croatian system for handling migrants and refugees has collapsed basically in one day,” Kovacs added. “What we see today is the failure of the Croatian state to handle migration issues. What is more we see intentional, intentional, participation in human smuggling taking the migrants to the Hungarian border.”

After Hungary blocked off their border with Serbia this week with the aid of a metal fence and riot police, migrants flooded neighboring Croatia in search for an alternative route. More than 17,000 have arrived in the country since Wednesday morning. “We cannot register and accommodate these people any longer,” Croatian Prime Minister Zoran Milanovic told a news conference. “They will get food, water and medical help, and then they can move on. The European Union must know that Croatia will not become a migrant ‘hotspot’. We have hearts, but we also have heads.”

Governments know our desire for safety all too well, and like to play on our fears. How often have we been told that this or that new rule or law or snooping activity on the part of officialdom is to keep us “safe”? We aren’t safe, anyway: many of us die in weather events – tornados, floods, blizzards – but governments, in those cases, limit their roles to finger-pointing, blame-dodging, expressions of sympathy or a dribble of emergency aid. Many more of us die in car accidents or from slipping in the bathtub than are likely to be done in by enemy agents, but those kinds of deaths are not easy to leverage into panic. Cars and bathtubs are so recent in evolutionary terms that we’ve developed no deep mythology about them.

When coupled with human beings of ill intent they can be scary – being rammed in your car by a maniac or shot in your car by a mafioso carry a certain weight, and being slaughtered in the tub goes back to Agamemnon’s fate in Homer, with a shower-murder update courtesy of Alfred Hitchcock in his film, Psycho. But cars and tubs minus enraged wives or maniacs just sit there blankly. It’s the sudden, violent, unpredictable event we truly fear: the equivalent of an attack by a hungry tiger. Yesterday’s frightful tigerish threat was communists: in the 1950s, one lurked in every shrub, ran the message. Today, it’s terrorists. To protect us from these, all sorts of precautions must, we are told, be taken. Nor is this view without merit: such threats are real, up to a point.

Nonetheless we find ourselves asking whether the extreme remedies outweigh the disease. How much of our own freedom must we sacrifice in order to defend ourselves against the desire of others to limit that freedom by subjugating or killing us, one by one? And is that sacrifice an effective defence? Minus our freedom, we may find ourselves no safer; indeed we may be double-plus unfree, having handed the keys to those who promised to be our defenders but who have become, perforce, our jailers. A prison might be defined as any place you’ve been put into against your will and can’t get out of, and where you are entirely at the mercy of the authorities, whoever they may be. Are we turning our entire society into a prison? If so, who are the inmates and who are the guards? And who decides?

A study released Thursday is the second this year seeking to debunk a 1998-2013 “pause” in global warming, but other climate scientists insist the slowdown was real, even if not a game-changer. When evidence of the apparent hiatus first emerged, it was seized upon by sceptics as evidence that climate change was driven more by natural cycles that humans pumping carbon dioxide into the atmosphere. “Our results clearly show that … there never was a hiatus, a pause or a slowdown,” Noah Diffenbaugh, the study’s main architect and a professor at Stanford University, said in a statement. The thermal time-out, his team found, resulted from “faulty statistical methods”.

In June, experts from the US National Oceanic and Atmospheric Administration (NOAA) came to the same conclusion, chalking up the alleged slowdown to a discrepancy in measurements involving ocean buoys used to log temperatures. Their results were published in the peer-reviewed journal Science. Beyond a strident public debate fuelled as much by ideology and facts, the “pause” issue has serious real-world implications. Scientifically, a discrepancy between climate projections and observations could suggest that science has overstated Earth’s sensitivity to the radiative force of the Sun. Politically, it could weaken the sense of urgency underlying troubled UN negotiations, tasked with crafting a global pact in December to beat back climate change.

At first, scientists sounding an alarm about the threat of greenhouse gases were stumped by the data, unable to explain the drop-off in the pace of warming. Even the UN’s Intergovernmental Panel on Climate Change (IPCC)—whose most recent 1,000-plus page report is the scientific benchmark for the UN talks—made note of “the hiatus”. Searching for explanations, the IPCC speculated on possible causes: minor volcano eruptions throwing radiation-blocking dust in the atmosphere, a decrease in solar activity, aerosols, regional weather patterns in the Pacific and Atlantic Oceans. To the general relief of the climate science community, the Stanford findings—a detailed review of statistical methodology—would appear to be the final word on the subject.

“..the country with the bigger deficit would have the bigger problem. And conventional belief would expect this to be state-oriented France, rather than the free-enterprise-oriented USA. Guess again..”

The contrast today between Europe—the subject of my first few posts on Forbes—and the USA could not be more extreme. The crisis, when it began in 2007/08, was seen initially as a purely American phenomenon—and by some, proof that the deregulated American (and more generally, the Anglo-Saxon) model of capitalism had failed, while Europe’s more collectivist version was still going strong. One of the most voluble putting that argument was then French President Nicolas Sarkozy, who asserted that the crisis proved that the American deregulated version of finance was kaput: “A page has been turned,” he said, on the “Anglo Saxon” financial model. “Even our Anglo-Saxon friends are now convinced that we must have reasonable rules.” Well that was then. Now, it’s the European system—and its very peculiar rules—that are looking decidedly poor, while the USA seems to be powering ahead.

A simple comparison of unemployment rates tells that story well. The US unemployment rate, which briefly exceeded France’s at the depth of the crisis in 2009-2010, is now falling rapidly, while France’s rate has stagnated, and is in excess of the worst that the USA experienced during the crisis. So does the resurgence of the USA and Europe’s stagnation make the opposite point to the one Sarkozy reached in such haste? Is the deregulated US model really the superior one, in that while it succumbed to crisis, its recovery was that much more robust that rule-bound Europe? I am sure that many commentators will reach that conclusion in the next few years. But I think they will prove to be as misguided—or rather as wrongly focused—as was Sarkozy.

There’s a cliché in statistics that “correlation isn’t causation”. I’ve often seen this used to simply dismiss an argument that the interjector doesn’t like, but its spirit applies here: people often draw inferences from the correlation of two factors—American model, recovery; European model, stagnation—when there’s actually a third causal factor at work that is the real explanation. [..] part of the reason for the divergence is that the EU’s policy of austerity—which began in mid-2010—has made the crisis much worse. On that front, the conventional wisdom—as enshrined in the European “Growth and Stability Pact”—is that the country with the bigger deficit would have the bigger problem. And conventional belief would expect this to be state-oriented France, rather than the free-enterprise-oriented USA. Guess again.

China needs to guarantee a “bottom line” of 6.5% annual economic growth for its 13th five-year-plan, a state newspaper quoted the director of the National Development and Reform Commission (NDRC) Department of Planning, Xu Lin as saying. That would mark the lowest annual growth rate since 1990. The comments by Xu, made on Feb. 14 at the “50 Forum Annual Meeting” – a gathering of Chinese economists – is also an acknowledgment that China is switching to a more sustainable pace of growth from the double-digit rates of the recent past. If this year’s GDP growth is 7%, then the “bottom line” for annual GDP growth in the 13th five-year-plan needs to be at least 6.5%, the China Securities Journal quoted Xu as saying.

China’s economy grew at 7.4% in 2014, its slowest pace in 24 years, dragged down by cooling property prices, slowing inflation and deteriorating domestic and foreign demand. Beijing is set to unveil China’s 13th five-year-plan after the National People’s Congress in March. The plan is an important document that outlines national priorities and sets targets for economic and social development. The International Monetary Fund said last year that China should set a less ambitious growth target of 6.5-7% in 2015 and refrain from stimulus measures unless the economy threatens to slow sharply from that level. China also needs to prioritize the systemic reform of property rights, taxation, banking, finance and rule of law, among other national priorities, Xu said.

Europe’s confrontation with Greece, the West’s with Russia as the Ukraine crisis runs nearly out of control: Why is it more useful by the week to think of these together? They are both very large, moments of history. There is this. They both reach critical moments this week, as if in concert. The outcomes in each case will be consequential for all of us. As noted with alarm last week, most Americans have by now surrendered to a blitz of propaganda wherein Russia and its leadership are cast as Siberian beasts, accepting as truth tales the National Enquirer would be embarrassed to run. In Europe, Greeks and Spaniards show us up, indeed, as a supine, spiritless people incapable of response or any resistance to the onslaught. There is this, too.

At writing, Yanis Varoufakis, Greece’s imaginative new finance minister, has just made his first formal effort to present European counterparts with new ideas to get foreign debts of €240 billion off the books and the Greek economy back in motion. These ideas can work. Even creditor institutions acknowledge that Greece cannot pay its debts as they are now structured. But at a session in Brussels Wednesday, the European Union’s arms remained folded. Also at writing, the Poroshenko government in Ukraine appears to have recommitted to a cease-fire signed last September in Minsk and promptly broken. It is not surprising given Kiev’s very evident desperation on all fronts. But neither would it be if Poroshenko once again reneges. There is a sensible solution on the table now, but these are not people who have so far been given to one.

There is something tragically irrational driving both of these crises. The genesis of each, at least nominally, is the question of whether markets serve society or it is the other way around. Economic conflict, then, has been transformed into humanitarian disasters. This is what Greece and Ukraine have most fundamentally in common. It is in search of a logical explanation of the illogic at work in these two crises that something else, something larger, emerges to bring them into a coherent whole. Washington has so many wars going now, none declared, one can hardly keep the list current. But the most sustained and havoc-wreaking of them is unreported. This is the war for neoliberal supremacy across the planet. Greece and Ukraine are best viewed as two hot fronts in this war, a sort of World War III none of us ever imagined.

The Great War of the American Empire began 25 years ago. It began on August 2, 1990 with the Gulf War against Iraq and continues to the present. Earlier wars involving Israel and America sowed the seeds of this Great War. So did American involvements in Iran, the 1977-1979 Islamic Revolution in Iran, and the Iran-Iraq War (1980-1988). Even earlier American actions also set the stage, such as the recognition of Israel, the protection of Saudi Arabia as an oil supplier, the 1949 CIA involvement in the coup in Syria, and the American involvement in Lebanon in 1958. Poor (hostile) relations between the U.S. and Libya (1979-1986) also contributed to a major sub-war in what has turned out to be the Great War of the American Empire.

The inception of Great War II may, if one likes, be moved back to 1988 and 1989 without objection because those years also saw the American Empire coming into its own in the invasion of Panama to dislodge Noriega, operations in South America associated with the war on drugs, and an operation in the Philippines to protect the Aquino government. Turmoil in the Soviet Union was already being reflected in a more military-oriented foreign policy of the U.S. Following the Gulf War, the U.S. government engages America and Americans non-stop in one substantial military operation or war after another. In the 1990s, these include Iraq no-fly zones, Somalia, Bosnia, Macedonia, Haiti, Zaire, Sierra Leone, Central African Republic, Liberia, Albania, Afghanistan, Sudan, and Serbia.

In the 2000s, the Empire begins wars in Afghanistan, Iraq, and Libya, and gets into serious military engagements in Yemen, Pakistan, and Syria. It has numerous other smaller military missions in Uganda, Jordan, Turkey, Chad, Mali, and Somalia. Some of these sub-wars and situations of involvement wax and wane and wax again. The latest occasion of American Empire intervention is Ukraine where, among other things, the U.S. military is slated to be training Ukrainian soldiers. Terror and terrorism are invoked to rationalize some operations. Vague threats to national security are mentioned for others. Protection of Americans and American interests sometimes is made into a rationale. Terrorism and drugs are sometimes linked, and sometimes drug interdiction alone is used to justify an action that becomes part of the Great War of the American Empire.

On several occasions, war has been justified because of purported ethnic cleansing or supposed mass killings directed by or threatened by a government. Upon close inspection, all of these rationales fall apart. None is satisfactory. The interventions are too widespread, too long-lasting and too unsuccessful at what they supposedly accomplish to lend support to any of the common justifications. Is “good” being done when it involves endless killing, frequently of innocent bystanders, that elicits more and more anti-American sentiment from those on the receiving end who see Americans as invaders? Has the Great War II accomplished even one of its supposed objectives?

Greek government spokesman Gabriel Sakellaridis showed no sign that Greece was backing off on its core demand. “The Greek government is determined to stick to its commitment towards the public … and not continue a program that has the characteristics of the previous bailout agreement,” he told Greece’s Skai television. He later said: “The Greek people have made it clear that their dignity is non-negotiable. We are continuing the negotiations with the popular mandate in our hearts and in our minds.” Some of the problems facing the Eurogroup are semantic. The Greeks, for example, will not countenance anything that smacks of an “extension” to the old bailout, preferring something new called a “bridge” agreement.

This is political. Tsipras rode into power on a wave of anti-austerity and anti-bailout anger last month and would have a hard time explaining a row-back so soon. Thousands of Greeks massed outside parliament in Athens on Sunday to back his strategy. But even a cosmetic change of labels could have practical consequences. An “extension” may not require many national ratifications unless it involves additional financial commitments from euro zone governments. Any new bailout program, on the other hand, might require several national parliamentary ratifications and could also bring Germany’s Constitutional Court into play. Among those requiring a parliamentary vote on a new bailout are Germany, Slovakia, Estonia and Finland, all identified by one veteran of EU meetings as part of a hard core of opponents to Greece’s plan.

The Eurogroup’s main debate with Greece’s “no austerity” stance will revolve around the funding of a bridge program, Greece’s request to reduce the ‘primary’ budget surpluses, excluding interest payments, that it is required to reach, and privatizations and labor reform. Greece said on Saturday that it was reviewing a €1.2 billion deal for Germany’s Fraport to run 14 regional airports, one of the biggest privatization deals since Greece’s debt crisis began in 2009. It has also pulled the plug on the privatization of the ports of Piraeus and Thessaloniki. On the question of liberalizing labor markets, government spokesman Sakellaridis remained tough: “We will discuss it with workers and with pensioners. Whatever we do, we will do through dialogue. We will not legislate at the sole behest of outside factors.”

” Europe’s been expanding up to the borders of Russia and there’s a country called Ukraine, and, essentially, that means that Europe is writing a put option, which Ukraine has now decided to cash in. Which is why, basically, Europe’s now on the hook for all the crap that is Ukraine. That’s a put option contract.”

Part of it is because what I think the financial crisis is best seen as — and we’re still dealing with the aftermath of it, whether we like it or not — is that there’s a class-specific put option. Let me explain what I mean by this: A put option is a contract that’s very common in finance where essentially someone is selling insurance and the other person is taking the income for payments. At some point, they get to basically cash in the put. One way to think about this is, Europe’s been expanding up to the borders of Russia and there’s a country called Ukraine, and, essentially, that means that Europe is writing a put option, which Ukraine has now decided to cash in. Which is why, basically, Europe’s now on the hook for all the crap that is Ukraine. That’s a put option contract.

What has this got to do with the financial crisis and why do I feel passionately about it? Well, remember all those banks that got bailed [out]? In order to get bailed out you need to have assets, and my liabilities are the bank’s assets. The bank doesn’t give a damn about my condo because they’ve got an income stream coming from the mortgage. The assets and liabilities of the bank and the private sector sum up to zero, so when you bail that out, what you’re doing is you’re bailing out the private sector’s assets, which basically means the top 20% – if not about the top 10%, the top 1% – of the income distribution.

How do you pay for those bailouts? You pay for those bailouts with cuts. And who are the people that use government services? Well, it’s not the top 20% or above of the income distribution, it’s the bottom 70% and below. That’s what I mean by a class-specific put option. The people at the top get their assets bailed; the government says, Oh my God, look at all that spending! It’s out of control! We need to cut policemen and fire brigades and healthcare and various public services.

As Prime Minister Alexis Tsipras focuses on the economic arguments for a new bailout deal for Greece, the country’s strategic importance to the European Union may do as much to persuade Germany to grant him concessions. With war in Syria to the east, the failure of the Libyan state to the south and a nascent cease-fire in Ukraine to the north adding to the perennial tensions between Israel and its neighbors, the value of Greece as a NATO member and its ports on the eastern Mediterranean is rising. “One would be justified to ask whether Europe, the U.S. and NATO could afford the creation of a security vacuum and a black hole in a critical region,” Thanos Dokos, director of the Hellenic Foundation for European and Foreign Policy said. “That may not be “an acceptable loss for an EU with any ambitions to play a meaningful global and regional role,” he said.

The diplomatic effort that persuaded Russia to halt the violence in Ukraine was punctuated by Tsipras’s own, far more amicable exchanges with President Vladimir Putin. It signaled to German Chancellor Angela Merkel that European powers have more than just 195 billion euros ($223 billion) of bailout funds at stake in its standoff with Greece. The country, among a handful that complies with the North Atlantic Treaty Organization’s defense spending recommendations, has more than 200 fighter jets and 1,000 tanks. NATO facilities include a military base in Crete that was used during the airstrikes on Libya in 2011. That role may be Tsipras’s strongest weapon in negotiations with the rest of the euro area, according to Dimitris Kourkoulas, a former deputy foreign minister. “This is probably the last bargaining card Tsipras has,” Kourkoulas said.

Western powers recognized Greece’s strategic importance during and after World War II. The country’s resistance to Italy under Benito Mussolini scored the first allied ground victories against the axis powers and is marked annually by a national holiday in Greece on Oct. 28. The U.S. and Britain then intervened in the civil war to help defeat the communists as the rest of eastern Europe fell under the influence of the Soviet Union. The Greeks joined NATO in 1952, three years before the Federal Republic of Germany and at the same time as Turkey. In 1981, Greece became the 10th member of the EU, joining before countries like Spain and Austria, and adopted the euro two decades later.

Thousands of Greeks gathered in central Athens Sunday in support of Prime Minister Alexis Tsipras’s government, as officials prepared for a crunch meeting with creditors aimed at breaking an impasse over financing Europe’s most indebted state.
Police said more than 20,000 people assembled in front of the Greek Parliament as of about 8 p.m. in Athens, with more expected to join during the evening. The show of support was directed at a government delegation led by Finance Minister Yanis Varoufakis that will return to Brussels early Monday to try and negotiate a bridge agreement with euro-area peers that allows time and financing to discuss Greece’s post-bailout era. Greek stocks and bonds rose on Friday as officials on both sides signaled a willingness to compromise.

With Greece’s current bailout running out at the end of February, discussions continued at technical level into the weekend to prepare the ground for the Brussels meeting of finance chiefs. “We’re looking at difficult negotiations on Monday,” Tsipras was cited as saying in a weekend interview with Germany’s Stern magazine. “Nevertheless, I’m full of confidence.” Talks took place on Saturday between officials from Greece’s finance and foreign ministries and technical delegations from the Troika. The focus was on identifying common ground and those areas of divergence rather than on negotiating, according to Greek and EU officials. Varoufakis said that both sides have agreed on many issues already, according to an interview with Kathimerini newspaper published on Saturday.

It still isn’t certain that a final agreement will be reached Monday, the Greek official said. Tsipras’s Syriza party was elected Jan. 25 on a platform of ending austerity, a partial debt writedown and no more audits by the troika of the commission, the ECB and the IMF. It is seeking a bridge agreement for the next six months that will replace its current bailout, which it blames for the country’s economic hardship, and secure the country’s financing needs to give officials time to discuss “a new deal” with the euro area, Tsipras said last week. The government is “determined to abide by its commitment to the Greek people and its fresh mandate to end austerity,” government spokesman Gabriel Sakellaridis told Skai TV Sunday.

Greek officials and the country’s creditors extended discussions through the weekend, as they raced to make progress ahead of the meeting of euro-area finance ministers in Brussels on Monday. While negotiators sought an agreement, government leaders back home reiterated their markers. For Greece, that means no discussions to continue its current bailout program, government spokesman Gabriel Sakellaridis told Skai TV this morning. French Foreign Minister Laurent Fabius, meantime, said that even as officials hold talks over Greece’s debt load, they aren’t willing to write it off. The government is “determined to abide with its commitment to the Greek people and its fresh mandate” for ending austerity,’’ Sakellaridis said.

Meetings dragged on in Athens, where the government held preparative discussions, and Brussels, where officials from Greece’s Finance and Foreign Ministries held “technical” talks with the EU, IMF and ECB, with the goal of laying the groundwork for a successor program. Greek Prime Minister Alexis Tsipras said it’s too early to say if there’s a deal in the making. Since coming to power in an election last month, Tsipras has maintained his pledge to help Greeks by reversing the austerity imposed under the country’s bailout. That’s led to clashes with other European governments. Germany, the biggest country contributor to bailouts, has led calls for Greece to stick to its political promises regardless of any change in government, while France and Italy have been more sympathetic to Greece’s efforts to secure bridge financing while it works out a longer-term plan.

In the face of opposition, the Greek government has already watered down its position on the debt, ditching a pre-election pledge for a writedown in its nominal value. Greece has more than €320 billion euros in debt outstanding, about 175% of GDP, mostly in the form of bailout loans from the euro area and the IMF. Frustration over the insurmountable pile of debt – even after the world’s biggest-ever restructuring in 2012 – and the dismal economic state helped Tsipras and his anti-austerity Syriza party topple former PM Samaras’s New Democracy in last month’s elections. “We’re looking at difficult negotiations on Monday,” Tsipras told Germany’s Stern magazine. “Nevertheless, I’m full of confidence.” [..] “We need time rather than money to put into effect our reform plan,” Tspiras said after convening a meeting of his cabinet in Athens Friday night, Stern reported. “I promise you, within six months Greece will then be a different country.”

A Greek exit from the eurozone would be the worst of all options for everybody involved, the head of the European bailout fund said in a televised interview aired Sunday, signaling willingness to compromise over some conditions that have been linked to the country’s existing bailouts. The comments come a day before a crucial meeting of eurozone finance ministers in Brussels, where officials will aim to lay the foundation of a financing deal for struggling Greece, whose existing bailout expires at the end of February. An exit from the eurozone would be “the most expensive solution both for Greece and for the euro area,” said Klaus Regling, the head of the European Stability Mechanism, in a transcript of an interview with German broadcaster Phoenix. “That’s why we try to prevent precisely this.”

Greece’s new leftist government wants to end the austerity course and reduce the country’s debt burden, and is refusing to complete the existing bailout program. Instead of extending its current program, Athens wants a bridge arrangement to keep it afloat until September while it negotiates less onerous terms for long-term assistance. “That a newly elected government has different priorities than the previous government is understandable and nothing new,” said Mr. Regling. “We have for instance seen this too when the government in Ireland changed in the middle of the [bailout] program. It was also possible there to change individual measures but the main direction was kept in place.”

He stressed that countries must embrace reforms to help generate more economic growth in the medium term. “The European Central Bank’s monetary measures can of course be supportive and have an effect,” he said. “With its recent decisions, the ECB has done the maximum to buy time. Now it’s up to the governments.”

Greece’s new prime minister Alexis Tsipras is “full of confidence” his country can secure a deal to ditch strict austerity measures while still satisfying Athens’ international creditors, despite warning that crunch talks in Brussels today would be “difficult”. As a key deadline approaches for Greece to either agree to stick to its existing bailout programme or reach a compromise with its lenders, eurozone finance ministers meet again on Monday in an attempt to hammer out an agreement. The new leftist Greek government is arguing for an end to relentless cuts imposed as a condition of the country’s rescue funding and wants more time to prove that a more pro-growth approach will work better. But it faces opposition from other eurozone countries, most notably Germany, which have pushed for the strict terms of Greece’s €240bn bailout programme to stay in place.

Talks in Brussels last week made no headway in resolving the standoff. But Tsipras also faces growing criticism from hard-left militants in his own party for appearing to row back on some pre-election pledges to ditch austerity measures. Asked about the Brussels talks, the 40-year-old prime minister told German news magazine Stern: “I expect difficult negotiations on Monday. But I am full of confidence. “I am in favour of a solution where everyone wins. I want a win-win solution. I want to save Greece from tragedy and Europe from a split.” “I promise you: Greece will, in six months’ time, be a completely different country,” he said. His finance minister Yanis Varoufakis told Greek newspaper Kathimerini at the weekend that a deal between Athens and the eurozone will be found, even if that may well be at the last minute.

But Tsipras not only has to persuade Berlin that debt-stricken Athens will keep along the path of reform, but assure his own hard-left militants that red lines will not be crossed in any compromise. There was mounting disquiet at the weekend that Varoufakis had gone too far by saying the new government was willing to implement 70% of the hated memorandum outlining Greece’s bailout accords. Firing a warning shot over the government’s bows, the energy minister Panagiotis Lafazanis, who represents Syriza’s radical wing, said there could be no solution if foreign lenders insisted on Athens adopting the “sinful memorandum”. “If our so-called partners insist, in any way, on extending the existing programme, that is to say the sinful memorandum because that is what they mean by the programme, there can be no agreement,” he told the state news agency ANA-MPA on Sunday.

Mario Draghi’s assurance that the European Central Bank has ring-fenced the risks of its bond-buying program has a caveat. While the ECB president says the euro area’s 19 national central banks will buy and hold their own country’s debt, the money they create – at least €1.1 trillion – can flow freely across borders through the region’s Target2 payment system. Should a nation build up liabilities and then leave the currency union, the remaining members may have to share the bill. The risks have been thrown more sharply into focus by the standoff between European governments and a newly elected Greek administration, which has prompted a deposit flight and put the country’s future in the euro in doubt.

As ECB officials join politicians gathering in Brussels on Monday to seek a solution to the crisis, Greece ultimately threatens to expose the weakness of measures to address legal constraints and public concern over central-bank stimulus. “There’s a political signal that comes out of the suspension of risk sharing: there’s no willingness in the ECB to build up fiscal risks via the back door if politicians aren’t,” said Nick Matthews at Nomura in London. “At the same time, asset purchases will create reserves that permeate through the Target2 system. The question of what happens if a country exits hasn’t been addressed.” Whatever happens in Brussels on Monday, Draghi and his Governing Council will meet in Frankfurt on Wednesday to nail down the details of quantitative easing.

Before buying starts in March, policy makers must sign off on the legal act and decide on key elements such as how assets will be bought and how to calculate self-imposed limits. ECB-style QE will be more complicated than programs by the Federal Reserve and Bank of England because it’ll happen in a currency union that isn’t backed by a fiscal union, with debt mutualization and central-bank financing of governments banned. That makes Target2, the Eurosystem’s financial plumbing, a potential indicator of where risks are building up.
When a lender in one country settles an obligation with a counterparty in another, the assets and liabilities are registered on the central-bank balance sheets. Those balances are aggregated each business day at the ECB, the Eurosystem’s hub, and reflected in Target2.

All five bailout countries are running negative Target2 balances, as are six others including Italy and France, according to data compiled by Germany’s Osnabrueck University. Greece had liabilities of 49 billion euros at the end of last year. The biggest creditor is Germany, which saw claims on the ECB jump to 515 billion euros at the end of January from 461 billion euros the previous month.

Greece’s pleas to stop the “fiscal waterboarding” of its devastated economy are substantively no different from President Obama’s repeated warnings to Germany to stop bleeding the euro area economy with excessive fiscal austerity. Sadly, the president’s reportedly more than a dozen phone calls to the German Chancellor Merkel in 2011 and 2012 urging supportive economic policies in the euro area fell on deaf ears. These calls were not just brushed aside; they were plainly ridiculed as Chancellor Merkel kept telling the media that “it made no sense to be adding new debt to old debt.” But – worrying about one-fifth of U.S. exports going to Europe – Washington kept trying.

The former U.S. Treasury Secretary Timothy F. Geithner went as far as visiting his German counterpart Wolfgang Schaeuble at his summer retreat on a North Sea island on July 30, 2012 to talk about relief to euro area economies. That’s where Geithner was in for a big shock. He writes in his book “Stress Test: Reflections on Financial Crises” that he was “frightened” by the German talk of Greece leaving (i.e., being pushed out of) the monetary union. President Obama, he says, was “deeply worried” about Berlin’s designs. In the end, Geithner had to settle for his host’s assurances that everything was going to plan, and that the heavily indebted euro area countries were making progress on their structural reforms.

Indeed they were: At the time of that meeting, the Greek economy was sinking at a rate of 6.9%, followed by economic downturns of 3.5% in Portugal, 2.4% in Italy, 1.6% in Spain and a continuing economic stagnation in France. These five countries represent 53.1% of the euro area economy, but Germany would not relent in its firm insistence on fiscal retrenchment. For the German Chancellor, these countries’ plight was just a case of self-inflicted wounds because “they did not respect the budget rules and failed to supervise their banks.” That message played well with domestic audience in the run-up to German elections in September 2013. Obviously, it was important to be seen as a stern guardian of German finances bent on protecting taxpayers from southern spendthrifts and fiscal miscreants.

That policy exasperated so much Jean-Claude Juncker to push him into an unheard of attack on German leadership. Currently serving as the president of the European Commission (EU’s executive body), Mr. Juncker was Luxembourg’s prime minister and the chairman of the Eurogroup (a forum of the euro area finance ministers) when he aired his concerns on July 29, 2012. Here is what he said: “… how can Germany have the luxury of playing domestic politics on the back of the euro? If all other 16 euro area countries did the same thing, what would remain of our common project? Is the euro zone just a branch office of the Federal Republic of Germany?”

The mainstream narrative about “recovery” from the financial crisis is a giant con job. And nowhere does the mendacity run deeper than in the “banks are fixed” meme—an insidious cover story that has been concocted by the crony capitalist cabals that thrive at the intersection of Wall Street and Washington. So this morning comes yet another expose in the Wall Street Journal about the depredations of Bank of America (BAC). Not surprisingly, at the center of this latest malefaction is still another set of schemes to grossly abuse the deposit insurance safety net and enlist the American taxpayer in the risky business of financing high-rolling London hedge funds. In this case, the abuse consisted of BAC funded and enabled tax avoidance schemes with respect to stock dividends – arrangements which happen to be illegal in the US.

No matter. BAC simply arranged for them to be executed for clients in London where they apparently are kosher, but with funds from BAC’s US insured banking entity called BANA, which most definitely was not kosher at all. As to the narrow offense involved – that is, the use of insured deposits to cheat the tax man – the one honest official to come out of Washington’s 2008-2009 bank bailout spree, former FDIC head Sheila Bair, had this to say: “I don’t think it’s an appropriate use.. Activities with a substantial reputational risk… should not be done inside a bank. You have explicit government backing inside a bank. There is taxpayer risk there.” She is right, and apparently in response to prodding by its regulator, BAC has now ended the practice, albeit after booking billions in what amounted to pure profits from these illicit trades.

But that doesn’t end the matter. This latest abuse by BAC’s London operation is, in fact, just the tip of the iceberg – the symptom of an unreformed banking regime that is rotten to the core and that remains a clear and present danger to financial stability and true economic recovery. And not by coincidence there stands at the very epicenter of that untoward regime a $2 trillion financial conglomerate that is a virtual cesspool of malfeasance, customer abuse, operational incompetence, legal and regulatory failure, downright criminality and complete and total lack of accountability at the Board and top executive level. In short, BAC’s six-year CEO, Brian Moynihan, is guilty of such chronic malfeasance and serial management failure that outside the cushy cocoon of TBTF he would have been fired long ago.

“In 2012 one in five children lived in a home that was cold or damp; one in 10 lacked a necessary clothing item, such as a warm winter coat; and one in 20 households couldn’t afford to feed their kids properly.”

There’s a minor domestic crisis in any family when the fridge-freezer breaks down. Wasted food; no fresh milk; pools of water on the kitchen floor. But for some households, the demise of the washing machine, the tumble dryer or the telly is more than a hiccup – it throws up a major financial challenge. That’s where firms like BrightHouse come in: pop into one of its 291 stores, and instead of having to find several hundred pounds up front, you can replace a busted appliance for a much more manageable £10-£15 a week. Except there’s a sting in the tail. When MPs on the all-party parliamentary group on debt and personal finance looked into these “rent-to-own” retailers, of which BrightHouse is the leader, they found that by the time delivery charges, insurance and servicing are loaded on, consumers who can ill afford it end up paying several times over.

One fridge-freezer with a five-year service plan, which sells for £644 at middle-class favourite John Lewis, ended up costing £1,716. They have now asked the regulator, the Financial Conduct Authority, to investigate. But, like disgraced payday lender Wonga, BrightHouse’s appeal is a sharp reminder of the precariousness of many families’ lives. Perhaps BrightHouse’s customers should have read the small print. But signing up to a usurious loan deal because of the temptingly low upfront payment is hardly a rare mistake in today’s credit-fuelled economy. Many rent-to-own customers – half of whom receive benefits, and who have on average £19 a week spare for one-off costs – have little or no alternative. According to Breadline Britain, a salutary new book from poverty researchers Stewart Lansley and Joanna Mack, a growing proportion of families are unable to afford the things – such as a working fridge – that most of us would define as essential.

In 2012, their large-scale research project found, one in five children lived in a home that was cold or damp; one in 10 lacked a necessary clothing item, such as a warm winter coat; and one in 20 households couldn’t afford to feed their kids properly. These children’s chances are hobbled long before they reach the school gates – and in many cases their parents are not in the dole queue, but juggling jobs. Many of the adults suffering this kind of “deprivation poverty” – more than half, in fact – are in work. Yet these are the people who have been on the receiving end of a pernicious rhetorical onslaught since 2010. In the Tory lexicon, they are the “troubled families” whose behaviour blights their neighbourhoods: the “skivers”, rather than “strivers”; the people whose blinds are down when their “hardworking” neighbours drag themselves out to work in the morning.

Kids Company is a rare children’s charity in that the people it feeds and looks after are self-referring. Children come to them by themselves, and later they bring others who are also in need. “Between 2011 and 2012 we saw a 233% increase in these self-referrals,” Guinness says. As a result they launched the Plate Pledge, a fundraising drive built around the £2 cost of a meal. While they get some funding from central government they get none from the boroughs of Lambeth or Southwark whose kids they look after, and still have to raise more than £24m a year to keep services running. The Plate Pledge has meant they have been able to serve another half a million meals. “But we’re not meeting demand,” Guinness says.

Not that anyone is clear what that demand actually is, because it’s hard to get definite numbers. “We tried to get real hard figures on child food poverty when we were researching our report into school food,” says Henry Dimbleby, founder of the Leon healthy fast-food chain, who co-authored the recent School Food Plan. “We found it impossible to do so.” It requires getting deep inside the private domain, into the tight weft and weave of the home and that is a very secretive and emotionally charged place. A team from Reading University recently conducted interviews with children who came to Kids Company, which painted a dismal portrait of need. One child, asked how they deal with hunger, said, with a brutal logic, “I just want to sleep cos… when I [go] to bed hungry and sleep, I’m not hungry.”

Another child, asked how common she found cupboards empty when she got home from school, just shrugged. It was, she said, “Normal. It’s like… don’t know… it’s normal.” Guinness is dismissive of the idea that it’s impossible to get data on these experiences. He has an email from a Department of Health official who admits that, while they do undertake nutrition surveys of the population, they don’t analyse the lowest income groups because “the sample size is too small”. Guinness knows from the demand they are seeing that the sample cannot be too small. I ask him, slightly desperately, if there is any sunlight in this story. “Yes, of course. When you feed a child, when you provide a family-like environment, they thrive. They turn in to fine young people. And it doesn’t cost much.”

Rolls-Royce has been accused of involvement in a multibillion-dollar bribery and kickback scheme at Petrobras, Brazil’s state-controlled oil producer, as more foreign companies are dragged into the country’s largest corruption scandal. The British engineering company, which makes gas turbines for Petrobras oil platforms, allegedly paid bribes via an agent in exchange for a $100 million contract as part of a scheme in operation during much of the past decade, according to testimony from a former Petrobras executive. Pedro Barusco, the Petrobras veteran who has emerged as one of the investigation’s key informants, told police he personally received at least $200,000 from Rolls-Royce — only part of the bribes he alleged were paid to a ring of politicians and other executives at the oil company.

The admission was buried in more than 600 pages of documents released by Brazil’s federal court system this month, detailing the testimonies of Mr Barusco who struck a plea bargain in November. Responding to Mr Barusco’s accusations, Rolls-Royce said: “We want to make it crystal clear that we will not tolerate improper business conduct of any sort and will take all necessary action to ensure compliance.” The accusations come as Rolls-Royce also faces a Serious Fraud Office investigation in the UK over allegations of bribery and corruption in China and Indonesia. They also come as the company is undergoing a painful restructuring, revealing its first fall in underlying sales in a decade and predicting a bigger than expected fall in profits in 2015.

Soviet football legend Aleksandr Zavarov said he will not fight in the eastern Ukraine conflict, after reports surfaced that a draft notice bearing the 53-year-old’s name was delivered to the Football Federation of Ukraine (FFU) last week. Zavarov, who was born in Lugansk, has categorically refused to comply with the notice. “I will say one thing, I will never fight where my family and kids live, where my parents are buried,” the assistant coach for the Ukraine national team said. “I just want peace.” In 1986, Zavarov was named the best football player in the USSR, and is widely considered to be one of the best players in Soviet history. The FFU received a conscription notice for 89 members of the organization, Ukrainian sports papers reported last week.

FFU representative Pavel Ternovoy confirmed the reports to R-Sport agency. “I can confirm that many members of the Football Federation of Ukraine received draft notices. Alexandr Zavarov and Yuriy Syvukha were among them,” he said. Yuriy Syvukha is a former goalkeeper and current assistant coach for the Ukraine national team. Ternovoy said that each conscript will have to decide for himself how to respond to his notice. “There is a war going on right now. Every citizen should understand what’s going on. What those who got the notices will do is entirely up to them,” he said. In January, Ukraine began a multi-stage military draft in the hope of enlisting 100,000 new recruits.

Reserve servicemen between the ages of 25 and 60 are eligible under the new guidelines. However, a Ukraine army spokesperson admitted late last month that the new draft has faced some problems as potential conscripts attempt to dodge the wave of mobilization. “The fourth wave of mobilization is problematic,” Vladimir Talalay said. “The biggest difficulties are seen in Sumy, Kharkov, Cherkassy, Ternopol, Zakarpatye, and other regions.” Almost 7,500 Ukrainians are already facing criminal charges for evading military service. Russian President Vladimir Putin has said that Ukrainian draft dodgers are welcome in Russia. He has promised to legalize longer stays in the Russian Federation for those facing conscription.

Almost every week I get an email from an American expatriate living outside the country who commiserates about the deplorable state of our freedoms in the United States, expounds on his great fortune in living outside the continental U.S., and urges me to leave the country before all hell breaks loose and my wife and children are tortured, raped, brutalized and killed. Without fail, this gentleman concludes every piece of correspondence by questioning my sanity in not shipping my grandchildren off to some far-flung locale to live their lives free of fear, police brutality, and surveillance. I must confess that when faced with unmistakable warning signs that the country I grew up in is no more, I have my own moments of doubt.

After all, why would anyone put up with a government that brazenly steals, cheats, sneaks, spies and lies, not to mention alienates, antagonizes, criminalizes and terrorizes its own citizens and then justifies it in the name of safety, security and the greater good? Why would anyone put up with militarized police officers who shoot first and ask questions later, act as if their word is law, and operate as if they are above the law? Why would anyone put up with government officials, it doesn’t matter whether they’re elected or appointed, who live an elitist lifestyle while setting themselves apart from the populace, operate outside the rule of law, and act as if they’re beyond reproach and immune from being held accountable?

Unfortunately, not only do we put up with a laundry list of tyrannies that make King George III’s catalogue of abuses look like child’s play, but most actually persist in turning a blind eye to them, acting as if what they don’t see or acknowledge can’t hurt them. The sad reality, as I make clear in my book A Government of Wolves: The Emerging American Police State, is that life in America is no bed of roses. Nor are there any signs that things will get better anytime soon, at least not for “we the people,” those of us who belong to the so-called “unwashed masses”—the working class stiffs, the hoi polloi, the plebeians, the rabble, the riffraff, the herd, the peons and the proletariats.

A hacker group has stolen as much as $1 billion from banks and other financial companies worldwide since 2013 in an “unprecedented cyber-robbery,” according to computer security firm Kaspersky Lab. The gang targeted as many as 100 banks, e-payment systems and other financial institutions in 30 countries including the U.S, China and European nations, stealing as much as $10 million in each raid, Kaspersky Lab, Russia’s largest maker of antivirus software, said in a report. The Carbanak gang members came from Russia, China, Ukraine and other parts of Europe, and they are still active, it said The criminals infected bank employees’ computers with Carbanak malware, which then spread to internal networks and enabled video surveillance of staff.

That let fraudsters mimic employee activity to transfer and steal money, according to Kaspersky Lab, which said it has been working with Interpol, Europol and other authorities to uncover the plot. “These bank heists were surprising because it made no difference to the criminals what software the banks were using,” said Sergey Golovanov, principal security researcher at Kaspersky Lab’s global research and analysis team. “It was a very slick and professional cyber-robbery.”

Criminals also used access to banks’ networks to seize control of ATMs and order them to dispense cash at certain times to henchmen, Kaspersky Lab said. In some cases the gang inflated the balance of certain accounts and pocketed the extra funds without arousing immediate suspicion, according to the report. U.S. President Barack Obama convened a national summit on Friday to encourage cooperation between federal and private security specialists to combat hackers and data breaches. The event included executives and security officials from companies such as Microsoft, Google, Yahoo! and Facebook and followed hacks at companies including Sony and JPMorgan last year.

A senior US scientist has expressed concern that the intelligence services are funding climate change research to learn if new technologies could be used as potential weapons. Alan Robock, a climate scientist at Rutgers University in New Jersey, has called on secretive government agencies to be open about their interest in radical work that explores how to alter the world’s climate. Robock, who has contributed to reports for the intergovernmental panel on climate change (IPCC), uses computer models to study how stratospheric aerosols could cool the planet in the way massive volcanic eruptions do. But he was worried about who would control such climate-altering technologies should they prove effective, he told the American Association for the Advancement of Science in San Jose.

Last week, the National Academy of Sciences published a two-volume report on different approaches to tackling climate change. One focused on means to remove carbon dioxide from the atmosphere, the other on ways to change clouds or the Earth’s surface to make them reflect more sunlight out to space. The report concluded that while small-scale research projects were needed, the technologies were so far from being ready that reducing carbon emissions remained the most viable approach to curbing the worst extremes of climate change. A report by the Royal Society in 2009 made similar recommendations. The $600,000 report was part-funded by the US intelligence services, but Robock said the CIA and other agencies had not fully explained their interest in the work.

“The CIA was a major funder of the National Academies report so that makes me really worried who is going to be in control,” he said. Other funders included Nasa, the US Department of Energy, and the National Oceanic and Atmospheric Administration. The CIA established the Center on Climate Change and National Security in 2009, a decision that drew fierce criticism from some Republicans who viewed it as a distraction from more pressing terrorist concerns. The centre was closed down in 2012, but the agency said it would continue to monitor the humanitarian consequences of climate change and the impact on US economic security, albeit not from a dedicated office. Robock said he became suspicious about the intelligence agencies’ involvement in climate change science after receiving a call from two men who claimed to be CIA consultants three years ago. “They said: ‘We are working for the CIA and we’d like to know if some other country was controlling our climate, would we be able to detect it?’

Filmmakers, authors, and media have widely speculated about how human life on Earth will end. Now scientists have come up with the first serious assessment, presenting 12 possible causes of the Apocalypse. Scientists from Oxford University’s Future of Humanity Institute and the Global Challenges Foundation have compiled the first research on the topic, drawing a list of 12 possible ways that human civilization might end. The idea of the study is not quite new. However, due to its treatment in popular culture, the possibility of the world’s infinite end provokes relatively little political or academic interest, making a serious discussion harder, according to researchers. “We were surprised to find that no one else had compiled a list of global risks with impacts that, for all practical purposes, can be called infinite,” said co-author Dennis Pamlin of the Global Challenges Foundation. “We don’t want to be accused of scaremongering but we want to get policy makers talking.”

Oil’s dramatic fall in price will have serious effects on revenues and spending in the sector, according to some industry analysts, with one investment firm predicting a sector-wide “recession” that will last for several years. Both U.S. crude and Brent futures fell to fresh 5-1/2-year lows on Tuesday, with the former slipping below $49. Weak global demand and booming U.S. oil production are seen as the key reasons behind the price plunge, as well as OPEC’s reluctance to cut its output. This sector slump will lead to a fight to the death for oil firms, according to analysts at Bernstein Research. The research firm likened the current environment to the Hollywood movie “The Hunger Games”, which portrays a dystopian post-apocalyptic future where the main protagonists battle each other to survive.

“Our research convinces us an oil services recession is largely unavoidable at even $80 a barrel…The Hunger Games have begun,” Nicholas Green, a senior analyst at the company, said in a note on Tuesday morning. Bernstein’s Green believes that offshore activity will also face a “structural recession.” He predicts that there will be only half of the new work available in 2015, compared to last year, and forecasts no material recovery before 2017. Other possible casualties of the sector’s struggle for survival are the high-risk and reward exploration and oil production companies (E&P), ratings agency Moody’s said Tuesday. If oil prices average $75 a barrel in 2015, then North American E&P companies would likely reduce their capital spending by around 20% from last year, according to Moody’s.

It could even be cut by 40% it oil starts at below $60 a barrel, it added. Oilfield services companies, or OFS, are companies that provide services to the E&P industry, and could face an earnings crunch of 12% to 17% if oil averages $75 a barrel in 2014, according to Moody’s. An average price below $60 a barrel in 2015 could drive earnings down by 25 to 30%, it added. Meanwhile, midstream operators – which are involved in the transportation of oil – would come under significant earnings pressure if this spending is cut, according to the ratings agency.

Oil prices sank to fresh 5-1/2-year lows on Tuesday, extending losses after a 5% plunge in the previous session as worries over a global supply glut intensified. Brent crude fell by 3% to below $52 a barrel as cuts to monthly oil selling prices for European buyers by top OPEC producer Saudi Arabia heightened worries about oversupply. “Saudi Arabia is showing no signs of pulling back,” said Bjarne Schieldrop, chief commodity analyst with SEB in Oslo. “Stocks are continuing to build, and there is an increase in contango.” While Saudi Arabia increased its selling price to Asia, some analysts said the cuts to Europe reflect the kingdom’s deepening defense of market share. This added to bearish data over the weekend showing that Russia’s 2014 oil output hit a post-Soviet-era high and exports from Iraq, OPEC’s second-largest producer, reached their highest since 1980.

On Tuesday, the UAE’s Abu Dhabi National Oil Company set the December retroactive selling price for its benchmark Murban crude at $60.65 a barrel, its lowest level since May 2009. “It’s hard to pinpoint a specific downward pressure,” Schieldrop said. Brent crude fell as low as $51.23 a barrel on Tuesday, its lowest level since May 2009. It was trading at $51.31 at 0942 GMT (0442 ET), down $1.80. U.S. crude was at $48.54, down $1.50, after falling to $48.47, its lowest since April 2009. Jitters over political uncertainty in Greece added to an already faltering eurozone economy, raising questions about energy demand in Europe and compounding the bearish sentiment. A slew of factors was keeping up the downward pressure on prices, analysts said, pointing to concerns about the Greek economy, high oil output from Russia, Iraq and the United States, and a stronger dollar. “The weak euro should be one of the reasons,” said Tamas Varga of PVM, adding: “When the Saudis are cutting prices, the markets are not going to go higher.”

European shares sank for a third day on Tuesday as a slide in oil prices showed no sign of easing off, supporting traditional safe-haven assets such as top-rated government bonds, the Japanese yen and the Swiss franc. Asian shares had slumped overnight after another day of drama on oil markets that drove U.S. crude to less than $50 a barrel for the first time since the first half of 2009 and handed Wall Street its worst losses in three months. The resulting bid for safety drove the average of yields on German, U.S. and Japanese 10-year debt to less than 1% for the first time. Also hit by a poor reading from a purchasing managers’ survey in Italy, all of Europe’s major exchanges were in negative territory an hour into morning trade.

“Global risk sentiment has been hurt by sliding stocks and oil prices. That is leading to a perception that there is a lack of demand and that has implications for global growth,” said Jeremy Stretch, head of currency strategy at CIBC World Markets. The FTSEuroFirst 300 index of leading shares, along with France’s CAC40 and Germany’s DAXI, were all down 0.8%. Britain’s oil and gas heavy FTSE index lost 1.3%. Japan’s Nikkei dropped 3%, its largest fall in almost 10 months while South Korean shares fell 1.7% to a 1-1/2-year low. Even high-flying mainland Chinese shares pulled back after hitting 5-1/2-year highs earlier in the session.

MSCI’s broadest index of Asia-Pacific shares outside Japan fell 1.4%. The slide in oil prices has shown little sign of abating in the new year, plunging as much as 6% on Monday as investors continue to reprice for broadly lower global demand and the impact of heavy U.S. shale drilling. Brent crude fell by another 1.5% to less than $53 after data showed Russian oil output at post-Soviet era highs and Iraqi oil exports near 35-year peaks. “Falls in oil prices are going beyond many people’s expectations. This will put pressure on the earnings of U.S. energy firms,” said Hirokazu Kabeya, senior strategist at Daiwa Securities in Tokyo.

Here’s how bearish some traders are getting on oil these days. Even before Nymex WTI crude futures on Monday dipped below $50 a barrel in the latest stage of the crude rout, Stephen Schork, editor of the widely followed Schork Report, took note of trading in well out-of-the-money put options (puts give you the right, but not the obligation, to sell the underlying futures contract at a specific strike price). Unsurprisingly, open interest (the number of open contracts) in $50 strike-price puts on the February WTI futures contract had risen to 22,537 as of Friday’s close from 193 contracts at the beginning of December. Open interest on $45 puts rose from 8 to 36,113, while open interest in $40 puts rose from 1 to 9,864.

Here’s where it gets interesting: Open interest on $30 puts on the March futures contract rose to 2,127 from 34, while $30 puts on the June contract rose from 35 to 51,252. In addition, there has even been some light trading in June $20 puts, with open interest at 176 as of Friday’s close. “In other words, bets on sub-$30 crude oil in June are now 1.7 times greater than physical inventory at the Nymex terminal complex in Cushing,” Schork said in a note, referring to the Oklahoma delivery point for WTI oil. Of course, a trader can make money on a put even if the price of the underlying contract doesn’t fall below the strike price. The value of the option can rise as the price of the commodity declines. But the pickup in interest in far out-of-the money calls is noteworthy for what it says about market psychology.

Is it a sign that market sentiment has moved to an extreme, setting the stage for a rebound? The economics of the oil market are effectively “broken” and that’s left “psychology” to drive price action, Schork said. Even though the market is oversold according to technical measures, that’s been the case for the past three months, he said. “We could get a rebound to $70, but we could see $30 before we see $70, so why do you risk $20 to win $20,” he said. “So no picking the bottom here.”

Caterpillar shares tumbled Monday as the company became the latest victim of the sliding price of oil. Caterpillar’s stock umbled almost 6% after J.P. Morgan downgraded it to underweight from neutral on concerns about the company’s direct exposure to oil and gas, and indirect exposure to mining, U.S. construction and emerging markets. The maker of diggers and dozers’ direct exposure to the sector is equal to about $6.5 billion, or 12% of revenue, while its indirect exposure may be as much as 15% of revenues, analysts wrote in a note. That means almost 30% of its total revenue is facing pressure in 2015 and 2016.

Caterpillar supplies turbines to offshore rigs, as well as reciprocating engines and transmissions for on-site drilling. It also provides construction equipment that is used in infrastructure development, along with aftermarket and other services. “Its indirect exposure may be greater than anticipated,” said the note. “Our analysis suggests that since 2010 U.S. construction equipment demand has been strongly correlated with the expansion of fracking and, as a result, we would expect to see a slowdown in equipment demand in 2015.” The North American construction market accounts for about 17% of Caterpillar’s revenue, and about 5% of its total revenue may be tied to oil and gas states.

Caterpillar also has exposure to Canadian Oil Sands, which is likely to experience a significant slowdown in demand. Emerging markets and the Middle East are other key markets that are expected to be hurt by the falling oil price. “Finally, the stronger dollar may also weigh on [Caterpillar’s] competitiveness against its international competitors and, given that senior executive compensation is based partly on market share, we would expect pricing to come under increasing pressure as we go forward,” said the note. Shares of the Dow Jones Industrial Average component have fallen 5.6% in the last three months, while the Dow has gained 2.9%.

Saudi Arabia made deep cuts to its monthly oil prices for European buyers on Monday, a move some analysts said reflects the kingdom’s deepening defense of market share, although it also hiked prices in Asia from record lows. State oil firm Saudi Aramco cut the official selling price (OSP) for its Arab Light crude to Northwest Europe, a region that buys only a small proportion of Saudi Arabia’s crude, by $1.50 a barrel for February, putting it at a discount of $4.65 a barrel to the Brent Weighted Average (BWAVE), the lowest since 2009. However, Aramco also raised its February price for its Arab Light grade for customers for Asia – the largest of its major markets, accounting for more than half of its exported crude – by 60 cents a barrel versus January to a discount of $1.40 a barrel to the Oman/Dubai average.

The $2 discount to Asia in January was the largest in records going back more than a decade, but traders had been expecting Aramco to hike prices by at least 20 to 30 cents due to the narrowing spread in the Dubai market. The Arab Light OSP to the United States, the fifth consecutive monthly cut, was set at a premium of 30 cents a barrel to the Argus Sour Crude Index (ASCI) for February, down 60 cents from the previous month. The Kingdom’s move to cut its OSPs has been perceived by many traders as a signal of its decision to abandon efforts to shore up falling crude oil prices and, instead, focus on maintaining its share of key markets.

“The moves are reinforcing that the Saudis just don’t intend to do anything to rebalance (price) levels,” said Gene McGillian, senior analyst at Tradition Energy in Stamford, Connecticut. Benchmark Brent oil prices held on to earlier deep losses following the publication of the Saudi OSPs on Monday, trading at around $53.50 a barrel, down $3 on the day. Some analysts, however, have said they see the changes in monthly differentials as a simple reflection of deteriorating market conditions, not an indicator of policy. One trader said that the cuts to Europe may be a result of trying to price out West African barrels from Europe.

Saudi Arabia raised the cost of its oil sales to Asia in February, prompting speculation the world’s biggest exporter is retreating from using record price discounts to defend market share. Saudi Arabian Oil will sell its Arab Light grade for $1.40 a barrel less than a regional average next month, the company said yesterday in a statement. That’s a narrowing from January, when the discount was $2, the biggest in at least 14 years. It decreased 11 prices globally and increased six. Brent oil fell 5.9% yesterday.

Oil prices collapsed 32% since OPEC decided to maintain its output target on Nov. 27, amid signs Saudi Arabia and other members are determined to let North American shale drillers and other producers share the burden of reducing an oversupply. When Aramco lowered prices for November it prompted speculation the nation was seeking to preserve market share. “They’re putting the brakes on a little bit,” Leo Drollas, a London-based independent consultant and former chief economist at the Centre for Global Energy Studies, said by phone. “It’s a little message that maybe prices are going down too far too quickly, and this is a little signal that they’re looking at things.”

As oil drops below $55 a barrel, speculation is growing that the central bank of western Europe’s biggest crude producer will need to cut rates again. A 54% slump in Brent crude since a June high has pummeled the offshore industry in Norway, where oil and gas make up 22% of gross domestic product. Over the same period the krone has lost about 20% against the dollar and 8% against the euro. The OBX benchmark stock index is down about 12%. The central bank delivered a surprise rate cut last month it said was triggered by plunging crude prices. Since then the oil price development has proven even worse than the central bank anticipated. In an interview yesterday, Governor Oeystein Olsen said $55 oil is “clearly lower” than expected in December.

At Norway’s biggest bank, DNB, economists say Olsen will need to reduce rates again in June from 1.25%. “The weaker krone buys Norges Bank some time before they make another cut,” Kjersti Haugland, an analyst at DNB, said by phone. After lowering rates for the first time in almost three years on Dec. 11, Olsen said he sees a “50-50 chance” of more easing this year. Nordea Bank, Scandinavia’s biggest bank, says that means another two reductions, bringing the benchmark deposit rate to 0.75%. The central bank, which also oversees Norway’s $850 billion sovereign wealth fund, plans to provide more detail on how oil prices will shape its policy in March, Olsen said. Brent crude will need to trade above $70 a barrel before pressure on monetary policy abates, Olsen said in a Dec. 12 interview. Since then, the price of oil has dropped 14% to its lowest level in more than five years.

Tumbling crude prices will trigger a flood of oilfield writedowns starting this month after industry returns slumped to a 16-year low, calling into question half a decade of exploration. With crude prices down more than 50% from their 2014 peak, fields as far-flung as Kazakhstan and Australia are no longer worth pumping, said a team of Citigroup analysts led by Alastair Syme. Companies on the hook for risky, high-cost projects that don’t make sense in a $50-a-barrel market include international titans such as Royal Dutch Shell and small wildcatters like Sanchez Energy. The impending writedowns represent the latest blow to an industry rocked by a combination of faltering demand growth and booming supplies from North American shale fields.

The downturn threatens to wipe out more than $1.6 trillion in earnings for producing companies and nations this year. Oil explorers already are canceling drilling plans and laying off crews to conserve cash needed to cover dividend checks to investors and pay back debts. “The mid-cap and small-cap operators are going to be hardest hit because this is all driven by their cost to produce,” said Gianna Bern, founder of Brookshire Advisory, who also teaches international finance at the University of Notre Dame. An index of 43 U.S. oil and gas companies lost about one-fourth of its value since crude began its descent from last year’s intraday high of $107.73 a barrel on June 20. The price dipped below $50 on Jan. 5, the lowest since April 2009.

The decline represents a $4.4 billion drop in daily revenue for oil producers, which equates to $1.6 trillion on an annualized basis, Citigroup researchers led by Edward Morse said in a Jan. 4 note to clients. The oil-market rout is exposing projects dating as far back as 2009 that were either poorly executed or bad ideas to begin with, Syme’s team said in a note to clients. Shell, Europe’s largest energy producer, may have as much as 5% of its capital tied up in money-losing projects. For U.K.-based BG Group, the figure could be as high as 8%, according to the Citi analysts. The biggest swath of asset writedowns probably will happen among U.S. explorers such as Sanchez, Matador and Clayton Williams that don’t have the same financial discipline as bigger producers such as Marathon Oil, Bern said.

There is a whiff of 1914 to the latest Balkan showdown. Everybody thinks everybody else is bluffing, all of them betting that a calamitous chain reaction will be averted. In Germany, Der Spiegel reports that Angela Merkel thinks Greece can be ejected safely from the euro, if the rebel Syriza party wins the elections on January 25 and carries out its pledge to tear up Greece’s hated “memorandum” with the EU-IMF “Troika”. The German Chancellor’s team are blanketing the airwaves in what looks like a campaign to drive the threat home. “We are past the days when we still have to rescue Greece,” said Michael Fuchs, the parliamentary leader of Mrs Merkel’s Christian Democrats. “The situation has completely changed. It is entirely different from three years ago when we didn’t have the backstop defences in place. Greece is no longer ‘systemically relevant’ for the euro.” He added wickedly that the single currency might actually be stronger without the Balkan troublemaker.

It was revealed last week that Germany offered Greece a “friendly” return to the drachma in 2011. Months later, Mrs Merkel was prepared to eject Greece from EMU altogether. Tim Geithner, the former US Treasury Secretary, said the Europeans seemed determined to teach Greece a lesson: “They lied to us, and we’re going to crush them,” was the gist of it. Mrs Merkel retreated only after it became clear that Spain and Italy would be engulfed by contagion if Greece was thrown out. This time, Berlin seems almost eager to finish the job. Yet Syriza’s ice-cool leader, Alexis Tsipras, is equally convinced that the EU elites will back down, knowing that they have invested too much political capital in Greece’s salvation to walk away. After all, the sums involved now are tiny compared to the €245 billion in loans already dispersed since the crisis erupted in May 2010. Surely, after having claimed so confidently that the crisis was essentially over, Mrs Merkel can hardly admit that her strategy has failed?

Syriza itself is a neo-Marxist mélange, an ideological work in progress. Mr Tsipras no longer has a picture of Che Guevara in his office and has quickly mastered the Brussels vernacular – so much so that EU leaders and City economists presume, rightly or wrongly, that his rhetoric is just for domestic consumption. Yet the ultra-Left Aristeri Platforma still holds the biggest bloc of votes on Syriza’s central committee, and has stated that the movement must “be ready to implement its progressive programme outside the eurozone” if the EU refuses to yield. Mr Tsipras clearly wants Greece to remain in the euro. But he continues to insist on terms that negate that. He says: “We will cancel austerity. Under a Syriza government Greece will exit the bailout. This is not negotiable.” Twisting his knife into the German psyche, he wants the same level of debt relief – 50% – that Germany secured in 1953, which Greece signed up to despite the death of some 300,000 of its citizens under Nazi occupation.

On the face of it, the ECB has many reasons to launch QE. For two years, inflation has consistently failed to reach the 2% target. In November, the annual price growth was just 0.3%, while the recent collapse in oil prices will generate further downward pressure in the coming months. Even more important, inflation expectations have started to de-anchor: forecasters and investors expect the undershooting of the target to persist over the medium term. Low inflation is already a serious obstacle to economic recovery and rebalancing within the eurozone. Outright deflation would be an even more dangerous threat.

So far, so good. Deflation risk is a legitimate reason for a central bank to loosen monetary policy. The ECB has already pushed funding rates close to zero and deposit rates into negative territory, as well as throwing money at banks and buying ABS and MBS in an attempt to get banks to lend. All this appears to have done is slow the rate at which M3 lending is falling (in a credit-money economy, I regard M3 lending as the best indicator of future NGDP growth). It’s hard to argue that the ECB has done anything like enough to counter deflationary pressures and restore growth. But I’m really not sure about this. He seems to think that the ECB must do QE because it has already been priced in by markets:

Should the ECB disappoint expectations, bond and foreign-exchange markets would confront an abrupt and damaging unwinding of positions: long-term interest rates would rise, stock markets would sink, and the exchange rate would appreciate.

A failure to deliver what markets expect is a central bank failure, is it? Really? More importantly, if markets have already priced in QE, why would actually doing QE make any difference? The price effects are already there, and yet M3 lending is falling, unemployment remains stubbornly high, manufacturing PMI is on the floor and so are inflation expectations. I can accept Pisani-Ferry’s argument that the ECB must now do QE because otherwise things will get much worse, but I can’t see how it is going to reverse the current deflationary trend unless it is far larger than the programme the market has already priced in. “Shock and awe” is needed. Where is the political will for this?

German Chancellor Angela Merkel is said to view Greece’s exiting the euro as a manageable risk that would pose no existential crisis for the common currency. That opinion, if she indeed holds it, is misguided at best and dangerous at worst. It’s true that Greece poses a less naked financial risk to the rest of the euro region than it did in 2009, when revelations about the true size of its deficit triggered the ongoing crisis. Today, only about a fifth of Greek government debts are owed to the private sector, thanks to the country’s bailout by the European Union, the European Central Bank and the International Monetary Fund. And borrowing by Greek private companies accounts for less than 1% of loans made by Europe’s biggest banks, according to JPMorgan.

So it’s true that, if Greek elections later this month produce a new government prepared to default on its debts rather than continue with austerity, the financial repercussions will be limited. That says little, however, about the chaos that could accompany the country’s departure from the euro. Contagion is never predictable. Once inclusion in the euro is shown to be ephemeral – despite the EU treaty’s insistence that membership is “irrevocable” – then other of the currency’s weaker members will be vulnerable to speculation about their staying power. Investors may be driven to short the bonds of Italy, Portugal or Spain – no matter how strong the economic or political arguments against their leaving the currency union – driving their borrowing costs to levels they can’t afford.

To be sure, Der Spiegel’s report about Merkel’s intentions might not accurately reflect Germany’s attitude to a Greek exit. Joachim Poss, a German coalition lawmaker, said today that the consequences would be “incalculable.” And German government spokesman Steffen Seibert noted the region’s policy is “to stabilize and strengthen the euro area, the euro area with all of its members, including Greece.” Nevertheless, the mere discussion of a potential fracture in the euro zone should be a warning to European leaders that their path to ever-closer union is anything but assured. The euro has slumped to its weakest value against the dollar since 2006. Although there are other factors involved, it is a reminder that investors aren’t keen on putting their money into a currency with an uncertain future. Make no mistake: No matter how much some politicians might claim that they’ve contained a potential Greek crisis, they have not. Any country exiting the euro would throw the common currency’s continued existence into doubt.

A new year is upon us and that means investors will take a fresh look at European stocks. Unfortunately, Europe’s gloomy picture hasn’t changed. Not enough growth. Inflation is too low. And unemployment is still too high in parts of Europe. Enter stage right: Mario Draghi. Arguably the most powerful European official, investors are betting on the European Central Bank President to unveil a full-blown program of quantitative easing to stimulate the region’s stagnant economy. “Will the ECB join in the fun? If yes – then that should bring stability to the Eurozone and help investors feel better – if not then watch out as global markets [to] adjust,” said Kenneth Polcari, Director at O’Neil Securities. The decision on full blown QE could come at the next governing council meeting on January 22th.

If the ECB does not join the party, then markets could be set for a steep decline. Already financial markets have been moving on the expectation that Draghi will deliver the goods. But if this is a classic –overpromise and underdeliver – something Draghi is quite good at, then traders say expect markets to react negatively. But even if Draghi does unveil what the market is anticipating, the question is, will further easing measures be the solution to Europe’s economic malaise? Sure, it worked in the U.S. but does that mean it will work in Europe? Some traders say no. An economic recovery takes more than just quantitative easing. Each individual economy needs to work on structural reform – policies to help revive their own respective countries. And while each country says it’s working on a plan – some analysts say more work can be done.

Less reliance on ECB and more action from individual country leaders is needed, they say. Despite what is most likely going to be a slow and drawn-out path to recovery, there are some investors who are bullish on Europe. In fact, Morgan Stanley writes that it is positive on European equities for 2015. Analysts there expect a pick-up in economic momentum, and 10% earnings per share (EPS) growth. One of the factors that should help earnings this year is a weaker euro. The single currency is currently trading at a multi-year low against the US dollar. “A key component in our 10% EPS forecast is the likely currency tailwinds that European companies will enjoy next year. Our foreign exchang strategists expect EUR/USD to reach 1.12 by the end of 2015,” writes Graham Secker, Morgan Stanley’s Chief European Equity Strategist.

JPMorgan Chase’s parts are probably worth more to investors than the whole after regulators proposed tougher rules penalizing firms for size and complexity, according to Goldman Sachs. JPMorgan could unlock value by splitting its four main businesses or dividing into consumer and institutional companies, Goldman Sachs analysts led by Richard Ramsden wrote today in a research note. Units of New York-based JPMorgan trade at a discount of 20% or more to stand-alone peers, they wrote. “Our analysis suggests that a breakup into two or four parts could unlock value in most scenarios, although the range of outcomes we assessed is wide, at 5% to 25% potential upside,” the analysts wrote. The move would reverse much of Chief Executive Officer Jamie Dimon’s work since taking over JPMorgan in 2006.

Under Dimon, 58, the firm grew to become the largest U.S. lender by assets and the world’s biggest investment bank after acquiring ailing firms during the 2008 financial crisis. Dimon has said the firm’s size creates opportunities to cross-sell products and better serve clients. “Each of our four major businesses operates at good economies of scale and gets significant additional advantages from the other businesses,” Dimon wrote in a letter to shareholders last year. “This is one of the key reasons we have maintained good financial performance.” The logic of a breakup would rely on the consumer business, commercial bank, investment bank and asset management unit being valued closer to so-called pure-play financial companies, the Goldman Sachs analysts wrote.

The parts probably could operate with lower capital levels as stand-alone firms, resulting in higher returns on equity, they wrote. The maneuver would risk some of the $6 billion profit JPMorgan says it makes tied to synergies between businesses, though a split into halves would preserve much of those benefits, the analysts wrote. The Federal Reserve laid out a plan last month that may require JPMorgan to add more than $20 billion to its capital by 2019. The rules could get even stricter, prompting banks to consider new business models, the Goldman Sachs analysts wrote. “JPMorgan – and other money centers – would strongly consider strategic alternatives, providing shareholders with a breakup ‘put option’ if capital requirements get tougher,” they wrote.

China is accelerating 300 infrastructure projects valued at 7 trillion yuan ($1.1 trillion) this year as policy makers seek to shore up growth that’s in danger of slipping below 7%. Premier Li Keqiang’s government approved the projects as part of a broader 400-venture, 10 trillion yuan plan to run from late 2014 through 2016, said people familiar with the matter who asked not to be identified as the decision wasn’t public. The National Development and Reform Commission, which will oversee the projects, didn’t respond to a faxed request for comment. The move illustrates concern among officials that China’s planned shift to a domestic-consumption driven economy has yet to produce enough growth momentum.

The yuan rose, halting a two-day decline, and Australia’s dollar – a proxy for China – climbed after the news. “It’s part of China’s efforts to stabilize growth, and the news will help to boost market confidence,” said Julia Wang, a Hong Kong-based economist with HSBC. “Infrastructure investment will continue to be a major driver for China’s economic growth.” The approvals contrast with past moves to boost growth via infrastructure in which the government gave the green-light to projects individually. They are part of efforts to respond to weak output, according to the people. The projects will be funded by the central and local governments, state-owned firms, loans and the private sector, said the people.

The investment will be in seven industries including oil and gas pipelines, health, clean energy, transportation and mining, according to the people. They said the NDRC is also studying projects in other industries in case the government needs to provide more support for growth. The NDRC’s spokesman, Li Pumin, said last month China would encourage investment in those areas. The Economic Observer newspaper reported Dec. 26 on its website that an official from the NDRC’s Zhejiang provincial bureau said the government had approved more than 420 infrastructure projects needing investment of more than 10 trillion yuan.

Venezuelan President Nicolas Maduro is beginning an international tour to try to stem the impact of falling oil prices and a deepening recession. Mr Maduro goes first to China – a major source of loans for Venezuela – for talks with the Chinese President, Xi Jinping. He will then travel to various Opec member countries to press for cuts in oil output that would boost prices. Venezuelan oil prices have dropped by half since June. The country gets most of its foreign currency from oil exports and is estimated to have the largest oil reserves in the world. Before he left Venezuela Mr Maduro announced a number of new mechanisms aimed at addressing the country’s economic crisis.

He said he would create a strategic reserve, appoint a new board to run the organisation that manages currency exchange controls, and create new agencies to manage the distribution of commodities. President Maduro has said his country is suffering the consequences of an economic war launched by US President Barack Obama “to destroy” the oil producers’ cartel, OPEC. He has also accused the US of flooding the markets with oil as part of an economic war against Russia. The Venezuelan opposition blames the country’s economic crisis and shortages of many staples, such as corn oil and milk, on the socialist policies of Mr Maduro and his late predecessor, Hugo Chavez.

Out shopping one winter weekday morning in the southern English town of Eastleigh, 58-year-old Steve Fryer has reason to smile. Hired at 16 by J Sainsbury Plc, he stayed with the retailer for four decades, ascending from the shop floor to management. With a pension that generates more than his final salary at retirement two years ago, he’s paid off his mortgage, owns a second home in a nearby coastal resort and is helping the last of three daughters on to the property ladder. Asked if he could secure the same prosperity starting out today, Fryer shakes his head. “I got through by hard work, but I was also working in the lucky years,” he says. “I don’t see a light at the end of the tunnel for the younger ones.” It’s an indictment heard across the U.K. four months from a general election that threatens to redraw the British political landscape.

As Prime Minister David Cameron campaigns for a second term on the U.K.’s economic recovery, his chances of re-election are undermined by a sense that things aren’t getting better for many voters after more than 4 1/2 years of austerity under the Conservative-led coalition. Take John Harcourt. At 21, he’s hunting for work in Eastleigh to lift him off welfare benefits before he goes to university later this year. He’s chosen to study motor-vehicle engineering, in part to avoid what he says is a lackluster labor market and to secure the skills he thinks he’ll need if he’s to find long-term employment. “It’s very difficult as there’s just not much turnover in jobs,” he says. “I’m happy to do anything. I’d do administration, retail, flip burgers.” You don’t have to walk far in Eastleigh, a town of about 125,000, to run into the two faces of the modern-day British economy.

Those at the end of their work life with a pension and property are coping with the tepid recovery from the 2008-2009 recession, while those starting out struggle to be hired, then face low wage growth once they have a job. Across the U.K., real weekly earnings – adjusted for inflation – dropped by 10.3% on average between 2008 and 2014, according to the Office for National Statistics. The opposition Labour Party says that equates to the biggest drop in real incomes since the time of Queen Victoria and the advent of industrialization more than a century ago. [..] Four years since Cameron declared “we’re all in this together,” the economic divide is not simply geographical but increasingly defines the country. While the government boasts of the fastest economic growth of any major developed nation, an Ipsos MORI poll in November found that eight in 10 Britons say they’ve felt little, if any, impact on their standard of living. [..]

Inside the gleaming mall here on the Sunday before Christmas, just one thing was missing: shoppers. The upbeat music of “Jingle Bell Rock” bounced off the tiles, and the smell of teriyaki chicken drifted from the food court, but only a handful of stores were open at the sprawling enclosed shopping center. A few visitors walked down the long hallways and peered through locked metal gates into vacant spaces once home to retailers like H&M, Wet Seal and Kay Jewelers. “It’s depressing,” Jill Kalata, 46, said as she tried on a few of the last sneakers for sale at the Athlete’s Foot, scheduled to close in a few weeks. “This place used to be packed. And Christmas, the lines were out the door. Now I’m surprised anything is still open.” The Owings Mills Mall is poised to join a growing number of what real estate professionals, architects, urban planners and Internet enthusiasts term “dead malls.”

Since 2010, more than two dozen enclosed shopping malls have been closed, and an additional 60 are on the brink, according to Green Street Advisors, which tracks the mall industry. Almost one-fifth of the nation’s enclosed malls have vacancy rates considered troubling by real estate experts — 10% or greater. Over 3% of malls are considered to be dying — with 40% vacancies or higher. That is up from less than 1% in 2006. Premature obituaries for the shopping mall have been appearing since the late 1990s, but the reality today is more nuanced, reflecting broader trends remaking the American economy. With income inequality continuing to widen, high-end malls are thriving, even as stolid retail chains like Sears, Kmart and J. C. Penney falter, taking the middle- and working-class malls they anchored with them.

“It is very much a haves and have-nots situation,” said D. J. Busch, a senior analyst at Green Street. Affluent Americans “will keep going to Short Hills Mall in New Jersey or other properties aimed at the top 5 or 10% of consumers. But there’s been very little income growth in the belly of the economy.” At Owings Mills, J. C. Penney and Macy’s are hanging on, but other midtier emporiums like Sears, Lord & Taylor, and the regional department store chain Boscov’s have all come and gone as anchors. Having opened in 1986 with a renovation in 1998, Owings Mills is young for a dying mall. And while its locale may have contributed to its demise, other forces played a crucial role, too, like changing shopping habits and demographics, experts say. “I have no doubt some malls will survive, but major segments of our society have gotten sick of them,” said Mark Hinshaw, a Seattle architect, urban planner and author.

As 2014 closed out, that kit-bag of frauds, swindles, Ponzis, grifts, bait-and-switches, and three-card-monte scams is looking at least as wobbly as it did in 2007 when Wall Street was busy manufacturing booby-trapped MBSs and CDOs. Except we know the true aggregate risk at stake has only grown larger and more hazardous due to all the strenuous efforts by authorities since the panic of 2008 to evade any natural process for clearing mal-investment and debt gone bad. A lot of that stank was simply shoveled into the Federal Reserve’s basement, where it sits to this day, composting steamily. As to be expected (and averred to in my previous books and blogs) financial repression, market intervention, and statistical distortion will produce ever more financial perversity.

That is the hazard in decoupling truth from reality. Imposed dishonesty will always express itself in unexpected ways. Who expected the price of oil to fall by nearly half in a few months? These days, perversity expresses itself in a morbidly obese dollar gorging on junk while bulimic currencies elsewhere projectile-vomit their value away as the economies attached to them die of malnutrition. Perhaps this comes as a surprise to central bankers standing at their control panels like recording engineers at the soundboard, tweaking all the dials and slides expecting to achieve a perfect repressive inflation rate of 2%+ so they can melt away the onerous debt of sovereign balance sheets and Too Big To Fail banks — incidentally squeezing the citizenry of purchasing power in small annual increments that add up, after a while, to worthless money.

They did manage to extend the inflation of stock market indexes another year, which the public is supposed to interpret as “prosperity.” Half a trillion dollars in stock buybacks of S&P companies were executed in 2014, much of it done with money, i.e. “leverage,” borrowed at zero interest. Stock buybacks boost share prices, of course, but they don’t represent any real increased value in a given company. They’re just snakes eating their own tails.

To my mind, the really interesting development of 2014 is that the world as a whole (with a few minor exceptions) has become quite lucid on the topic of what the United States, as a global empire, is and stands for. It is now very commonly and completely understood that: 1. The United States is an evil empire, attempting not so much to rule the world as to disrupt it to its short-term advantage, 2. The United States is failing, as an empire and as a country, and no amount of fraud, mayhem, torture and murder is going to save it, 3. The United States is still quite powerful and can cause massive damage on its way down. This damage must be contained, while plans are drawn up for an international arrangement that will arise upon its demise.

Looking back on 2013 and before, such sentiments were already being expressed, but on the fringes and quietly. The difference is that in 2014 they became commonplace knowledge, and their expressions thundered from presidential podiums. What’s more, there just isn’t that much of a counterargument being voiced. I don’t hear a single voice out there arguing that the US is a benevolent force that is on the up-and-up, would never hurt a fly and is the permanent center of the universe. Yes, some people can still think that, but it’s hard to see value in such “thought.” There are still a few holdouts: the UK, Canada and Australia especially. But even there the true picture is being distorted because of their Murdockified national media.

Judging from what I hear from the people there, they are almost uniformly nauseated by the subservient pro-US antics of their national leaders. As for the EU, the image of political uniformity presented by Brussels is largely a fiction. In the core countries of Western Europe, business leaders are almost uniformly in favor of close cooperation with Russia and against sanctions. Along the fringe, entire countries appear to be on the verge of switching sides. Hungary—never a friend of Russia—now seems more pro-Russian than ever. Bulgaria, which has had a love/hate attitude toward Russia for centuries now, seems to be edging back closer to love. Even the Poles are scratching their heads and wondering if close cooperation with the US is in their national interest.

Another major shift I have observed is that a significant percentage of the thinking people in the US no longer trusts their national media. There is a certain pattern to the kinds of messages that can go viral and spread wildly via tweets and social media. Fringe messages must, by definition, stay on the fringe. And yet last year something snapped: a few times I ran a story in an attempt to plug a gaping hole in the US mass media’s coverage of events in the Ukraine, and the response was overwhelming, with hundreds of thousands of new readers showing up. What’s more, a lot of them have kept coming back for more. I take this to mean that what I have to say, while by no means mainstream, is no longer on the fringe, and that bloggers have an increasingly important role in helping plug the giant holes in national media coverage.

The construction of a huge dam in Ethiopia and the introduction of large-scale agricultural businesses has been controversial – finding out what local people think can be hard, but with the help of a bottle of rum nothing is impossible. After waiting several weeks for letters of permission from various Ethiopian ministries, I begin my road trip into the country’s southern lowlands. I want to investigate the government’s controversial plan to take over vast swathes of ancestral land, home to around 100,000 indigenous pastoralists, and turn it into a major centre for commercial agriculture, where foreign agribusinesses and government plantations would raise cash crops such as sugar and palm oil. After driving 800km (497 miles) over two days through Ethiopia’s lush highlands I begin my descent into the lower Omo valley.

Here, where palaeontologists have discovered some of the oldest human remains on earth, some ancient ways of life cling on. Some tourists can be found here seeking a glimpse of an Africa that lives in their imagination. But the government’s plan to “modernise” this so-called “backward” area has made it inaccessible for journalists. As my jeep bounces down into the valley, I watch as people decorated in white body paint and clad in elaborate jewellery made from feathers and cow horn herd their cows down the dusty track. I arrive late in the afternoon at a village I won’t name, hoping to speak to some Mursi people – a group of around 7,000 famous for wearing huge ornamental clay lip plates. The Mursi way of life is in jeopardy. They are being resettled to make way for a major sugar plantation on their ancestral land – so ending their tradition of cattle herding.

Meanwhile, a massive new dam upstream will reduce the Omo River, ending its seasonal flood – and the food crops they grow on its banks. It is without doubt one of the most sensitive stories in Ethiopia and one the government is keen to suppress. Human rights groups have repeatedly criticised schemes like this, alleging that locals are being abused and coerced into compliance. I’d spoken to local senior officials in the provincial capital of Jinka, before travelling into the remote savannah. The suspicion is palpable as the chief of the south Omo zone lectures me. Local people and the area’s reputation have been greatly harmed by the negative reports by foreigners, he says. Eventually a frank exchange takes place and I secure verbal permission to report on the changes taking place in the valley.

If the end of the world arrives, chances are you aren’t going to be watching CNN. But just in case you are, the cable news network has a video ready for the Big Sign-off. That’s according to blogger Michael Ballaban who posted the purported footage online. The clip isn’t much, really – just low-res footage of a US Army band playing a mournful rendition of Nearer My God to Thee, which takes a little over a minute. Then fade, presumably, to the rapture, apocalypse, giant comet impact or whatever coup de grace fate has in store for our little blue marble. Writing on the Jalopnik blog, Ballaban says he first heard about the video from a college professor who worked at CNN. He was then able to confirm its existence when he was an intern at the network in 2009. The video, he reports, is available on CNN’s MIRA archiving system under the name “TURNER DOOMSDAY VIDEO” – the lingering legacy, it seems, of now-departed CNN founder Ted Turner.

Of course, it’s existence shouldn’t be a total shock. Mr Turner has said that the same tune that serenaded the doomed passengers of the sinking Titanic would usher the world’s population into the great hereafter. Still, Ballaban writes, he was a bit sceptical. “It sounded mostly like a mythic joke, the kind of thing that Ted Turner, the all-around ‘eccentric billionaire’ archetype, would mention offhand. Bison ranches, the America’s Cup, four girlfriends at once, the last word on the last day on earth – why not?” he writes. Just in case there is any confusion, the video clip is marked, in bright red letters, with an HFR – “hold for release” – warning: “HFR till end of the world confirmed.” “CNN, once ever so thorough in its fact-checking, knew that the last employee alive couldn’t be trusted to make a call as consequential as one from the Book of Revelation,” Ballaban writes. “The end of the world must be confirmed.”